SCI SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 25, 1996
To the Shareholders of SCI Systems, Inc.:
Notice is hereby given that the 1996 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 25, 1996, at 500 Civic Center Drive,
Augusta, Maine 04330 (the "Meeting"), for the following purposes:
(1) to elect Class III Directors to serve for a term of three years;
(2) to approve the Company's Senior Executive Officers Annual 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, 1997; 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 16, 1996,
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.
<PAGE>
By order of the Board of Directors,
[GRAPHIC OMITTED]
Michael M. Sullivan
Secretary
<PAGE>
Huntsville, Alabama
September 25, 1996
<PAGE>
Please sign, date and promptly mail the enclosed white proxy card in the postage
paid envelope provided.
<PAGE>
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 25, 1996, at 500
Civic Center Drive, Augusta, Maine 04330 and at any and all adjournments or
postponements of such meeting (the "Meeting"). If the enclosed form of proxy is
executed, returned in time, and not revoked, it will be voted in accordance with
the specifications, if any, made by the shareholder, and if specifications are
not made, it will be voted for election of the director nominees named herein,
for approval of the Senior Executive Officers Annual 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 25, 1996.
VOTING SECURITIES
At the close of business on September 16, 1996, the record date for
determining shareholders entitled to notice and to vote at the Meeting, there
were outstanding 29,662,395 shares of common stock of the Company, par value
$0.10 ("Common Stock"). 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 Common Stock as of December 31, 1995 (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 4,215,600 14.30%
82 Devonshire Street, Boston, Massachusetts 02109-3614
(1) According to a Schedule 13G dated February 14, 1996, filed pursuant to the
Securities Exchange Act of 1934.
Ownership of Equity Securities in the Company
The following table sets forth information regarding beneficial ownership of
Common Stock by each director, the Named Executive Officers, and the directors
and executive officers of the Company as a group as of September 16, 1996.
Aggregate Number of Shares Percentage of
Name
Beneficially Owned Outstanding Shares
Olin B. King 1,290,767 (1) 4.35
A. Eugene Sapp, Jr 217,048 (1) *
David F. Jenkins 50,837 (2) *
Howard H. Callaway 48,245 (3) *
Jerry F. Thomas 44,497 (4) *
Peter M. Scheffler 15,900 (4) *
Jackie M. Ward 5,781 (5) *
G. Robert Tod 4,389 (6) *
William E. Fruhan 4,195 (7) *
Wayne Shortridge 1,695 (8) *
Joseph C. Moquin 1,340 (9) *
All Directors and Executive
Officers as a group (15 persons) 1,821,487 (10) 6.14
* Indicates less than 1% of issued and outstanding shares of Common Stock.
(1) Includes 277,750 and 150,200 shares not presently owned by Messrs. King
and Sapp, respectively, but which are subject to stock options exercisable
within 60 days after September 16, 1996.
(2) Includes 49,150 shares not presently owned but which are subject to stock
options exercisable within 60 days after September 16, 1996.
(3) Includes 1,500 shares owned by Mr. Callaway's spouse, 5,500 shares owned
of record by the Howard H. Callaway Foundation, Inc., 970 shares not
presently owned by Mr. Callaway but which are subject to stock options
exercisable within 60 days after September 16, 1996, and 275 shares owned
through the Directors' Deferred Compensation Plan. 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 42,925 and 15,600 shares not presently owned by Messrs. Thomas
and Scheffler, respectively, but which are subject to stock options
exercisable within 60 days after September 16, 1996.
(5) Includes 2,000 shares owned by the estate of Ms. Ward's deceased husband,
485 shares not presently owned by Ms. Ward but which are subject to stock
options exercisable within 60 days of September 16, 1996, and 711 shares
owned through the Directors' Deferred Compensation Plan. Ms. Ward does not
have voting power over the shares and is not a beneficiary of the estate
of her deceased husband. Reporting of her husband's shares is not an
admission by Ms. Ward of beneficial ownership of those shares.
(6) Includes 242 shares not presently owned by Mr. Tod but which are subject
to stock options exercisable within 60 days of September 16, 1996, and 627
shares owned through the Directors' Deferred Compensation Plan.
(7) Includes 695 shares owned through the Directors' Deferred Compensation
Plan.
(8) Includes 695 shares owned through the Directors' Deferred Compensation
Plan.
(9) Includes 340 shares owned through the Directors' Deferred Compensation
Plan.
(10)Includes 649,722 shares not presently owned by directors or executive
officers but which are subject to stock options exercisable within 60 days
of September 16, 1996, and 3,068 shares owned through the Directors'
Deferred Compensation Plan.
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 currently fixed the number of directors at seven, with two directors in
Class I, three in Class II, and two in Class III. Board members serve three-year
terms. The terms are staggered to provide for election of one class each year.
Class III directors are to be elected at the Meeting.
The Board has nominated G. Robert Tod and A. Eugene Sapp, Jr. for election as
Class III 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.
<TABLE>
<S> <C> <C>
Positions with the Company Director
Name and Age And Principal Occupation Since
Class III Director Nominees
(Term expiring in 1999)
G. Robert Tod (2) (3) President and Chief Operating Officer, CML Group, Inc., Acton, 1981
(57) MA, a specialty marketing company, since 1969.
A. Eugene Sapp, Jr. (1) (4) President and Chief Operating Officer of SCI Systems, Inc. 1981
(60)
Class II Directors
(Term expiring in 1998)
Jackie M. Ward (1) (2) Chief Executive Officer, Computer Generation Incorporated, Atlanta, GA, 1992
(58) 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, Janofsky & Walker, January 1994 to present; Partner, 1992
(58) Powell, Goldstein, Frazer & Murphy, Atlanta, GA., 1968 to January 1994.
William E. Fruhan (1) (3) The George E. Bates Professorship, Harvard University, Graduate School 1992
(53) of Business, Cambridge, MA., 1979 to present.
Class I Directors
(Term expiring in 1997)
Olin B. King (4) Chairman of the Board and Chief Executive Officer of SCI Systems, Inc. 1961
(62)
Howard H. Callaway (2) (3) Chief Executive Officer, Crested Butte Mountain Resort, Inc., Crested Butte, CO, 1976
(69) a resort complex, since 1979; Chairman, Callaway Gardens Resort, Inc.,
Pine Mountain, GA, a resort complex, since January 1994.
<FN>
(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, 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 Nations Bank Corporation.
</FN>
</TABLE>
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 fiscal year 1996 the Board met four times; the Executive Committee met
nine times; the Investment Committee met five times; the Compensation Committee
met two times; and the Audit Committee met once.
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 the investment funds of
the Company and of each employee benefit trust established by the Company, and
for directing the investment funds of the Company's Supplemental Retirement
Plan.
For Fiscal 1996 the six outside directors were paid an annual fee of $13,500
plus $1,000 per Board meeting attended and $500.00 per committee meeting
attended, except that, in addition to the annual fee and Board Meeting fee, Mr.
Moquin, a retiring director, was paid $150 per hour for Executive Committee
meetings and for other work done for the Company as requested. In 1996 Mr.
Moquin was paid $1,200 for attendance at Executive Committee meetings only.
The Company has adopted a Directors' Deferred Compensation Plan pursuant to
which non-employee Directors may elect in advance to defer all or part of their
Director's fees in return for stock equivalent rights equal to the number of
shares of Common Stock which he or she could have purchased with the deferred
fees. If a Director defers 100% of his or her fees earned during an entire year,
the Director will also be entitled to additional stock equivalent rights equal
to 40% of the deferred fees. The deferred fees and any additional earned stock
equivalent rights are contributed by the Company to a trust which purchases
Common Stock in the open market as the Directors' fees are deferred and holds
the Common Stock in the name of the Director participant. On termination of a
Director's service from the Board for any reason, all stock equivalent rights
earned by the Director pursuant to the Plan will be paid out to him or her by
the trust in Common Stock held in his or her name.
The following Directors elected to defer receipt of 100% of their Board
fees for fiscal year 1996 pursuant to the Directors'
Deferred Compensation Plan: Dr. Fruhan, Messrs. Callaway, Shortridge and
Tod, and Ms. Ward. Mr. Moquin elected to defer 100% of
his Board fees for three of the four Meetings held during the year. No director
exercised stock options during the year.
The Board of Directors recommends a vote "FOR" the re-election of the director
nominees named above.
PROPOSAL 2-APPROVAL OF SCI SYSTEMS, INC.
SENIOR EXECUTIVE OFFICERS ANNUAL INCENTIVE PLAN
The Senior Executive Officers Annual Incentive Plan (the "Plan") is an incentive
plan intended to link the amount of annual cash incentive awards granted to the
Company's Chief Executive Officer and Chief Operating Officer ("Senior Executive
Officers") to corporate performance, based on the relative responsibility of the
individual to whom the award is granted. For several years annual incentive
compensation granted to Mr. King, Chairman and Chief Executive Officer, and Mr.
Sapp, President and Chief Operating Officer, pursuant to the Plan has been set
at 1% and .65% of the Company's annual net income, respectively. See
"Compensation Committee Report on Executive Compenstation--Annual Incentive
Program."
The Board of Directors has determined that it is in the best interest of the
Company and its shareholders to seek shareholder approval of the Plan in view of
the federal tax provisions contained in Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"). Under Code Section 162(m), the Company
may be prohibited from deducting the expense of compensation accrued or paid to
any Named Executive Officer to the extent such compensation exceeds $1 million
for any taxable year of the Company. An exception to this deduction limit exists
for performance-based compensation, such as the incentive awards granted under
the Plan, if the material terms of the performance-based compensation awarded to
the Senior Executive Officers are disclosed to and approved by the shareholders.
Shareholder approval of the Plan is thus sought in order that awards granted
under the Plan will be fully tax deductible by the Company.
Payment of annual incentive awards will be made in cash unless the Senior
Executive Officers elect to have payment of the award deferred pursuant to the
Company's Deferred Compensation Plan.
The Board of Directors may at any time amend, suspend, discontinue, or
terminate the Plan.
Your Board of Directors recommends that Shareholders vote "FOR" the SCI
Systems, Inc. Senior Executive Officers Annual Incentive Plan.
PROPOSAL 3-RATIFICATION OF SELECTION OF AUDITORS
Ernst & Young LLP has served as independent certified public accountants 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, 1997.
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 1997.
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 54, joined the Company in April 1986 as Senior
Vice President, Government Division.
Mr. Jeffery L. Nesbitt, age 45, joined the Company in 1985 as Plant Manager
and was promoted to Vice President in 1987 and to Senior Vice President, Eastern
Region, in 1991.
Mr. David F. Jenkins, age 59, joined the Company in 1990 as Vice President
and was promoted to Senior Vice President, Western Region, in 1991.
Mr. Alexander A.C. Wilson, age 59, joined the Company as Senior Vice
President, 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 55, has held various positions with the Company
since 1963. In 1987 he was named Vice President, and in September 1993 he was
promoted to Senior Vice President, Central Region.
Mr. Peter M. Scheffler, age 45, joined the Company as Senior Vice President
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.
The following table summarizes for the last three completed fiscal years the
compensation of the five most highly compensated executive officers including
the Chief Executive Officer ("Named Executive Officers") of the Company whose
salary and bonus exceeded $100,000 for the year ended June 30, 1996:
<PAGE>
<TABLE>
Summary Compensation Table
Long Term
<CAPTION>
Annual Compensation Compensation
Name and Total Securities All Other
Principal Annual Underlying Compensation
Position Year Salary ($) Bonus ($) Compensation ($) Options (#) ($) (c)
-------- ---- ---------- --------- ---------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Olin B. King, 1996 504,051 809,547(a) 1,313,598 45,000 18,146
Chairman & CEO 1995 464,709 452,426 917,135 40,000 16,596
1994 399,573 211,613 611,186 40,000 14,385
A. Eugene Sapp, Jr., 1996 382,326 526,205(a) 908,531 30,000 13,764
President & COO 1995 358,309 294,077 652,386 28,000 12,444
1994 308,800 137,548 446,348 28,000 11,117
Jerry F. Thomas, 1996 172,181 173,700(a) 345,881 14,000 6,183
Senior Vice President, 1995 161,371 105,833 267,204 12,000 5,809
Central Region 1994 139,962 66,825 206,787 10,000 5,039
David F. Jenkins, 1996 196,953 128,478(a) 325,431 14,000 4,727
Senior Vice President, 1995 182,282 153,791 336,073 12,000 3,281
Western Region 1994 160,004 71,338 231,342 12,000 2,898
Peter M. Scheffler, 1996 195,459 67,291(a) 262,750 12,000 236,227(d)
Senior Vice President, 1995 189,510 65,599 255,109 8,000 213,455(d)
Asian Region 1994 70,673(b) 22,479(b) 93,152(b) 10,000 107,050
(a) The 1996 bonus is a good faith estimate of the amount payable when final
accounting is completed and approved by the Board of Directors.
(b) Represents partial salary and bonus for the year Mr. Scheffler joined
the Company.
(c) Amounts represent the Company's contributions to the Company's 401(k) and
Deferred Compensation Plans, which Plans are available to all eligible
employees.
(d) Amounts represent contributions of $3,518 in 1996 and $1,654 in 1995 to
the Company's 401(k) and Deferred Compensation Plans, with the remainder
representing foreign living and car allowances.
Stock Option Grants in Last Fiscal Year
Prior to October 28,1994, the Company granted stock options to executive
officers and other key employees pursuant to its Incentive Stock Option and
Non-Qualified Stock Option Plans, and after October 28, 1994, pursuant to its
1994 Stock Option Incentive Plan (the "1994 Plan"). The Company does not grant
Stock Appreciation Rights (SARs). The following table sets forth certain
information regarding stock options granted to the Named Executive Officers
during fiscal year 1996 under the 1994 Plan:
Potential Realizable
Number of Value at Assumed
Securities % of Total Annual Rates of Stock
Underlying Options Granted to Price Appreciation for
Options Employees in Exercise or Base Expiration Option Term
Name Granted (#) Fiscal Year Price ($/SH) Date 5% ($) 10% ($)
---- ---------- ----------- ------------ ---- ------ -------
Olin B. King 45,000 15.31 35.00 10/28/05 990,509 2,510,144
A. Eugene Sapp, Jr. 30,000 10.20 35.00 10/28/05 660,339 1,673,430
David F. Jenkins 14,000 4.76 35.00 10/28/05 308,158 780,934
Jerry F. Thomas 14,000 4.76 35.00 10/28/05 308,158 780,934
Peter M. Scheffler 12,000 4.08 35.00 10/28/05 264,136 669,372
The assumed annual rates of appreciation of five and ten percent would result
in the price of the Company's common stock increasing by $22.01 and $55.78,
respectively, by the end of the option term.
<PAGE>
Aggregated Option Exercises in Fiscal Year 1996 and
Fiscal Year-End Option Values
The following table summarizes options exercised during fiscal year 1996 and
presents the value of unexercised options held by the Named Executive Officers
at fiscal year-end under all stock option Plans:
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired Value at Fiscal Year End (#) At Fiscal Year End ($)
Name on Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ----------- ----------- ------------- ----------- -------------
Olin B. King 47,700 1,429,353 246,750 82,000 7,469,969 1,250,500
A. Eugene Sapp, Jr. 59,300 1,369,046 129,000 56,000 3,809,125 863,000
David F. Jenkins -0- -0- 39,950 24,800 1,097,294 371,800
Jerry F. Thomas 15,500 390,438 34,125 24,000 922,678 353,900
Peter M. Scheffler -0- -0- 11,600 18,400 223,350 251,900
</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. ("Plan Sponsor"), 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 participants 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 1996 until retirement, estimated annual benefits payable upon retirement to
the Named Executive Officers are as follows: Mr. King, $60,322; Mr. Sapp,
$53,866; Mr. Jenkins, $23,277; Mr. Thomas, $31,423 and for Mr. Scheffler,
$71,276. These estimated benefits are subject to the Internal Revenue Code of
1986 (the "Code") ss.415 maximum benefit limitations. In addition, these
benefits do not reflect the maximum limitation on includable employee
compensation under Code ss.401(a)(17) effective for plan years beginning in
1989. The maximum limitation in 1996 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 compensation
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 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, 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
other Company officers. Annual incentive compensation for Messrs. King, Chairman
and CEO, and Sapp, President and COO, is granted pursuant to the Company's
Senior Executive Officers Annual Incentive Plan and is based upon the Company's
annual profits. This incentive compensation has been set for several years at 1%
of the Company's annual net income for Mr. King and .65% of annual net income
for Mr. Sapp.
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 five year 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 their personal commitment to the Company and lengthen their
perspective. The Committee's policy is to grant stock option awards annually,
based both upon 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 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, 1995, and 1996. Total Annual
Compensation for these officers increased in fiscal year 1996, and generally
tracked the overall performance of the Company during the three year period.
Chief Executive Officer Compensation:
In determining Mr. King's base salary, annual bonus, and stock option grant
in fiscal year 1996, the Committee considered 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
incentives for future performance.
The 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 1996. Company results and Mr. King's individual performance
during the year were excellent. The Company had record revenues, record net
income, record new orders received and finished the year with record order
backlog.
In Proposal 2 of this Proxy Statement the Company requests Shareholder
approval of the Company's "Senior Executive Officers Annual Incentive Plan" at
the Company's October 25, 1996, Annual Shareholders' Meeting (please refer to
Proposal 2 elsewhere in this Proxy Statement). If Company Shareholders approve
this Plan, the Committee does not believe that compensation of any Company
officer is likely to exceed the non-performance based $1 million threshold limit
of Section 162(m) of the Internal Revenue Code.
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
<PAGE>
Performance Graph
The following graph sets forth a comparison of the cumulative total Company
shareholder return with those 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, 1991) 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
30,1991, 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
NORMALIZED PRICE SCIS DJIA H&Q HARDWARE
06/91 100 100 100
09/91 93 104 108
12/91 87 109 100
03/92 117 111 105
06/92 95 114 106
09/92 153 113 95
12/92 243 114 87
03/93 282 118 87
06/93 230 121 85
09/93 225 122 75
12/93 235 129 91
03/94 213 125 96
06/94 202 125 83
09/94 282 132 99
12/94 240 132 113
03/95 249 143 117
06/95 333 157 146
09/95 460 165 158
12/95 413 176 163
03/96 488 192 160
06/96 542 195 172
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 ten 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. and 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, 1996, all Section 16(a) filing requirements applicable
to its officers, directors and greater than ten percent beneficial owners were
met, except that Ms. Ward filed a Form 5 at the end of the Company's fiscal year
reporting five transactions by her deceased husband which should have been
reported by Ms. Ward as they occurred, but which were not discovered by Ms. Ward
until she was notified of such by representatives of his estate. Ms. Ward
disclaims beneficial ownership of these securities.
GENERAL
<PAGE>
Any shareholder of the Company wishing to submit a proposal at the Company's
1997 annual meeting of shareholders and desiring the proposal 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,
attention Secretary, not later than May 28, 1997, 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 has also retained D.F.
King & Co., Inc. to provide routine advice and services for proxy solicitation
for a fee of $3,000. 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.
<PAGE>
By Order of the Board of Directors.
-------------------------------------
Michael M. Sullivan
Secretary
Huntsville, Alabama
September 25, 1996
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<S> <C> <C>
PLEASE DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
This Proxy, when properly executed, will be voted in accordance with the directions given by the undersigned shareholder. If no
direction is made, it will be voted in favor of Proposals 1, 2 and 3 and will be voted on any discretionary matters in accordance
with the best judgement and discretion of the Proxies.
Dated:. , 1996
Signature
Additional Signature, if held jointly
Please sign exactly as your name(s) appears hereon. If your shares are held jointly, each shareholder named should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give your full title as such. If the signatory is a
corporation, please sign the full corporate name by a duly authorized officer.
SCI SYSTEMS, INC.
This Proxy is solicited on behalf of the Board of Directors of the Company
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement, each dated
September 25, 1996, and does hereby appoint Olin B. King and A. Eugene Sapp, Jr., and either of them, with full power of
substitution, as proxy or proxies of the undersigned to represent the undersigned and to vote all shares of SCI Systems, Inc.Common
Stock which the undersigned would be entitled to vote if personally present at the Annual Meeting of Shareholders of SCI Systems,
Inc. to be held at 500 Civic Center Drive, Augusta, Maine 04330 at 10:00 a.m., Eastern Daylight Savings Time, on October 25, 1996,
and at any adjournment of postponement thereof, upon the following matters as specified:
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ITS NOMINEES AND THE FOLLOWING PROPOSALS.
1. Election of Class III Directors
FOR all nominees listed below (except as marked to the contrary below) WITHHOLD AUTHORITY to vote for all nominees
listed below
G. Robert Tod A. Eugene Sapp, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write that nominee's name in the space provided below.)
2. Approval of the Senior Executive Officers Annual Incentive Plan.
FOR AGAINST ABSTAIN
3. Ratification of the selection of Ernst & Young LLP as the Company's auditors for the fiscal year ending June 30, 1997.
FOR AGAINST ABSTAIN
4. In their discretion, the Proxies are authorized to vote on such other business as may properly come before the meeting or any
adjournment or postponement thereof.
This Proxy may be revoked at any time prior to the voting thereof.
(PLEASE SIGN AND DATE ON REVERSE SIDE AND RETURN IN THE ENCLOSED ENVELOPE)
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