As filed with the Securities and Exchange Commission on June 10, 1996
Registration No. 333-05917
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
SCI SYSTEMS, INC.
- -----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-0583436
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
c/o SCI Systems (Alabama), Inc., 2101 West Clinton Avenue, Huntsville, Alabama
35805, (302) 998-0592
- -------------------------------------------------------------------------------
(Address, including zip code, and telephone, including area code, of
registrant's principal executive offices)
Olin B. King, Chairman of the Board,
c/o SCI Systems (Alabama), Inc., 2101 West Clinton Avenue, Huntsville, Alabama
35805, (205) 882-4600
- -------------------------------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
G. WILLIAM SPEER, ESQ.
Powell, Goldstein, Frazer & Murphy
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 572-6600
(Approximate date of commencement of proposed sale to the public) At such time
or times after this Registration Statement becomes effective as the Selling
Holders may determine. If of the only securities being registered on this form
are to be offered pursuant to dividend or interest reinvestment plans, please
check the following box. [ ]
<PAGE>
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ] If this Form is filed to
register additional securities for an offering pursuant to Rule 462(b) under the
Securities Act, please check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
- --------------------------------------------------------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(C) under
the Securities Act, check the following box and list the Securities Act
registration statement for the same offering. [ ]
- --------------------------------------------------------------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Title of each maximum maximum
class of securities Amount to be offering price per aggregate offering Amount of
to be registered Registered unit price registration fee
(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(a) 5% Convertible
Subordinated Notes due 2006
$287,500,000 100% $287,500,000 $99,137.93
- ------------------------------------------------------------------------------------------------------------------------------------
(b) Common Stock, $.10
par value per share
N/A N/A N/A
5,897,435 (2)
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Estimated solely for the purpose of calculating registration fee pursuant to
Rule 457(I) under the Securities Act of 1933, as amended.
(2) Issuable upon conversion of the Notes registered hereby. Includes such
indeterminable number of shares of Common Stock as may be issued on conversion
of the Notes by reason of adjustment of the conversion rate in certain cases
outlined in the Prospectus. Such Common Stock will, if issued, be issued for no
additional consideration, and therefore no registration fee is required.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission acting pursuant to said Section
8(a) may determine.
<PAGE>
[Side bar]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such State. [End
of side bar]
SUBJECT TO COMPLETION DATED JUNE 10, 1996
SCI Systems, Inc.
5% Convertible Subordinated Debentures
Due 2006
This Prospectus relates to the 5% Convertible Subordinated Notes Due 2006 (the
"Notes") of SCI Systems, Inc. ("SCI") or (the "Company") and the shares of the
Company's Common Stock, par value $.10 per share ("Common Stock"), issuable upon
the conversion of the Notes. The Notes were issued and sold on April 23 and 26,
1996 (the "Original Offering") in transactions exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
to persons reasonably believed by Salomon Brothers Inc, Merrill Lynch & Co. and
Montgomery Securities, as the initial purchasers ("Initial Purchasers") of the
Notes, to be "qualified institutional buyers" (as defined by Rule 144A under the
Securities Act), other institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) or in transactions
complying with the provisions of Regulation S under the Securities Act. The
Notes and the Common Stock issuable upon the conversion thereof may be offered
and sold from time to time by holders named herein or by their transferees,
pledgees, donees or their successors (collectively, the "Selling Holders")
pursuant to this Prospectus. The Registration Statement of which this Prospectus
is a part has been filed with the Securities and Exchange Commission (the
"Commission")pursuant to a registration agreement dated as of April 23, 1996
(the "Registration Agreement") between the Company and the Initial Purchasers,
entered into in connection with the Original Offering.
The Notes will mature on May 1, 2006. Interest on the Notes will be paid
semi-annually on May 1 and November 1 of each year, commencing November 1, 1996.
The Notes are convertible at the option of the holder thereof, at any time after
90 days following the date of original issuance thereof and prior to maturity,
unless previously redeemed, into shares of Common Stock of the Company at a
conversion price of $48.75 per share, subject to adjustment in certain events.
On June 7, 1996, the last reported sale price of the Common Stock on the Nasdaq
Stock Market's National Market (Symbol SCIS) was $43.50 per share. The Notes are
redeemable, in whole or in part, at the option of the Company at any time after
May 1, 1999, at the redemption prices set forth herein, together with accrued
interest. The Notes do not provide for any sinking fund. Upon a Designated Event
(as defined), holders of the Notes will have the right, subject to certain
restrictions and conditions, to require the Company to purchase all or any part
of the Notes at a purchase price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest to the date of purchase.
The Notes are unsecured obligations of the Company and will be
subordinate in right of payment to all existing and future Senior Indebtedness
(as defined) of the Company. The Notes will also be structurally subordinated to
all liabilities of the Company's subsidiaries. As of March 24, 1996, the Company
had approximately $217 million of indebtedness that would have constituted
Senior Indebtedness.
The Notes and the Common Stock issuable upon the conversion of the
Notes may be sold by the Selling Holders from time to time directly to
purchasers or through agents, underwriters or dealers. See "Plan of
Distribution." If required, the names of any such agents or underwriters
involved in the sale of the Notes and the Common Stock issuable upon the
conversion of the Notes in respect of which this Prospectus is being delivered
and the applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in the accompanying supplement to this
Prospectus (the "Prospectus Supplement").
The Selling Holders will receive all of the net proceeds in the sale of
the Notes and the Common Stock issuable upon the conversion of the Notes and
will pay all underwriting discounts and selling commissions, if any, applicable
to the sale of the Notes and the Common Stock issuable upon the conversion of
the Notes.
The Selling Holders and any broker-dealers, agents or underwriters
which participate in the distribution of the Notes and the Common Stock issuable
upon the conversion of the Notes may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commission received by them and any
profit on the resale of the Notes and the Common Stock issuable upon the
conversion of the Notes purchased by them may be deemed to be underwriting
commissions and discounts under the Securities Act. See "Plan of Distribution"
for a description of indemnification arrangements.
Prospective investors should carefully consider the matters discussed
under the caption "Risk Factors."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is June 10, 1996.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, NW, Washington, D.C. 20549, and at
the Commission's Regional Offices located at Seven World Trade Center, 13th
Floor, New York, New York 10048; and at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, NW, Washington, D.C. 20549, at prescribed rates. The Company's Common
Stock is listed on the Nasdaq National Market System, 1735 K Street, N.W.,
Washington, D.C. 20006, and reports, proxy statements and other information
concerning the Company can be inspected at said exchange.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein together with all amendments and exhibits thereto, called the
"Registration Statement") under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth or incorporated by reference in the Registration
Statement and the exhibits and schedule relating thereto, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered by this Prospectus, reference is made to the Registration
Statement and the exhibits filed or incorporated as a part thereof, which are on
file at the offices of the Commission and may be obtained upon payment of the
fee prescribed by the Commission, or may be examined without charge at the
offices of the Commission. Statements contained in this Prospectus as to the
contents of any documents referred to are not necessarily complete, and, in each
such instance, are qualified in all respects by reference to the applicable
documents filed with the Commission.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference:
(I) The Company's Proxy Statement for its Annual Meeting of Shareholders
dated October 27, 1995;
(ii) The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1995 (including portions of the Company's 1995
Annual Report to Shareholders, incorporated therein by reference);
(iii) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 24, 1995;
(iv) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 24, 1995;
(v) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 24, 1996; and
(vi) The Company's Current Reports on Form 8-K filed with the Commission
on August 22, 1995, April 15, 1996 and June 14, 1996.
In addition, all reports and other documents filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Notes shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing such documents. ANY statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents incorporated
herein by reference (other than exhibits not specifically incorporated by
reference into such documents). Requests for such documents should be directed
to SCI Systems, Inc., Attn.: Investor Relations, 2000 Ringwood Avenue, San Jose,
California 95131 (408) 943-9000; or Ronald G. Sibold, Treasurer, SCI Systems,
Inc., c/o SCI Systems (Alabama), Inc., P.O. Box 1000, Huntsville, Alabama 35807,
(205) 882-4131.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and is subject to,
the detailed information, Consolidated Financial Statements and Notes thereto
contained elsewhere or incorporated by reference in this Prospectus.
Prospective investors should carefully consider the factors set forth under
the caption "Risk Factors." As used herein, "SCI" and the "Company" refer to
SCI Systems, Inc. and its subsidiaries, unless the context otherwise
requires.
The Company
SCI Systems is the largest global supplier of full-service contract
manufacturing to the electronics industry, providing a broad range of
manufacturing services to original equipment manufacturers (OEMs) in the
computer, telecommunications, medical, aerospace and defense, and
entertainment industries. SCI's strategically located plants in North
America, Western Europe and East Asia manufacture components, subassemblies,
and finished products for the Company's diversified and growing base of
commercial customers, including Hewlett-Packard, Tandem Computers, IBM, Apple
Computer, and Digital Equipment Corporation. The Company operates the largest
surface mount technology (SMT) capacity in the merchant market with 148
automated SMT lines and 42 automated pin-in-hole (PIH) assembly lines
installed in twenty plants in eight countries.
SCI has experienced rapid revenue growth in recent periods. In the fiscal
year ended June 30, 1995, revenues increased 44% to $2.67 billion from $1.85
billion a year earlier. For the nine months ended March 24, 1996, revenues
grew 74% to $3.19 billion from $1.83 billion in the prior fiscal year's
comparable period. The Company is benefiting from an ongoing shift to
outsourcing as OEMs seek solutions to rapidly changing manufacturing
technologies, new product proliferation, shorter product life cycles, intense
cost pressures and heightened user reliability and quality expectations.
The key elements of SCI's focus are quality products, competitive pricing
and customer responsiveness. The Company implements this philosophy through
the continuous upgrading of its technology and systems, geographic expansion
to remain close to customers, and management commitment to quality
improvement. The Company is committed to maintaining modern manufacturing
technologies, with current equipment additions focusing on evolving SMT
processes and a range of microelectronic assembly processes. The Company has
also expanded the number of production lines devoted to finished product
assembly, burn-in, and test to meet a growing number of customers'
requirements.
An essential element of the Company's infrastructure is a multitiered
configuration of information systems which utilize both standard and
customized software to implement advanced applications at mainframe, server,
and desktop levels. Significant upgrades and expansions of system hardware,
software, and communications elements have been implemented. These systems
are increasingly interlinked with counterpart customer systems to implement
order flow, production status information, billing, and material management
in a timely manner.
<PAGE>
The Company maintains a continuous program of manufacturing process,
system, and product development. Computer aided design centers are employed
at strategic regional plants in support of domestic and foreign customers.
Much of the Company's design automation emphasis is currently focused upon
surface mount technology and advanced manufacturing processes. New product
development is usually undertaken in support of customer requirements.
All of the Company's manufacturing facilities are registered to the quality
requirements of the International Organization for Standardization (ISO
9000), as is its purchasing organization. The Company has received numerous
quality awards from its customers which include many of the largest personal
computer and peripheral product OEMs.
Recent Developments
On May 31, 1996 the Company finalized an agreement with Apple Computer,
Inc. ("Apple") to purchase Apple's 360,000 square foot Fountain, Colorado
manufacturing plant (the "Fountain Facility"). The Fountain Facility provided
manufacturing services in support of Apple's product requirements for the
Americas. The Fountain Facility manufactures subassemblies and finished
computers for Apple, and employed approximately 1,000 employees. The cash
acquisition price aggregated $195 millions.
At closing of the Fountain Transaction, the Company entered into a related
three year manufacturing agreement with Apple. The manufacturing agreement
provides that the Company will manufacture agreed upon levels of designated
Apple products. The Company expects the Fountain Transaction to result in
significant volume of business. The Fountain Facility will also provide the
Company with manufacturing capacity for potential use by other customers.
There can be no assurance that the Company will successfully integrate the
operations of the Fountain Facility. See "Risk Factors--Fountain Transaction"
and "Business--Recent Developments."
<PAGE>
The Offering
Securities..............Offered......$287,500,000 aggregate principal amount of
5% Convertible Subordinated Notes due 2006.
Maturity................May 1, 2006, unless earlier redeemed, repurchased
or converted.
Interest................Payment Dates..May 1 and November 1 of each year,
commencing November 1,1996.
Conversion..............The Notes are convertible, unless previously redeemed
or repurchased, at the option of the holder, at any time
after 90 days following the date of original issuance
thereof and prior to maturity, into shares of Common
Stock at a conversion price of $48.75 per share, subject
to adjustments in certain events. See "Description of
Notes--Conversion."
Designated Events.......Upon a Designated Event (as defined), holders of the
Notes will have the right, subject to certain
restrictions and conditions, to require the Company to
purchase all or any part of their Notes at a purchase
price equal to 101% of the principal amount thereof
together with accrued and unpaid interest thereon to
the date of the purchase. See "Description of Notes--
Repurchase at the Option of Holders " and "Risk Factors-
-Limitations on Repurchase of Notes Upon Occurrence of
Designated Event."
Ranking.................The Notes offered hereby will be unsecured obligations
of the Company and will be subordinated in right of
payment to all existing and future Senior Indebtedness
of the Company. The Notes also will be structurally
subordinated to all existing and future indebtedness
and other liabilities of subsidiaries of the Company.
At March 24, 1996, the Company had approximately
$217 million of indebtedness outstanding that would
have constituted Senior Indebtedness. The Indenture
contains no limitation on the incurrence of Senior
Indebtedness or the incurrence of other indebtedness
and other liabilities by the Company or its
subsidiaries. See "Description of Notes."
<PAGE>
<TABLE>
Summary Consolidated Financial Data
<CAPTION>
Year Ended June 30,
Nine Months Ended
----------------------
----------------------------------------------------------------------------- March 26, March 24,
1991 1992 1993 1994 1995 1995 1996
--------------------------------------------------------------------------------------------------------
Consolidated Statement of (In thousands, except ratios and per share data)
Income Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 1,121,807 $ 1,038,454 $ 1,672,115 $ 1,852,478 $ 2,673,783 $ 1,831,431 $ 3,192,873
Income from 8,485 6,802 42,883 46,916 75,661 51,143 94,772
continuing
operations before taxes
and
extraordinary item
Income from 9,242 9,061 30,615 29,936 45,243 31,197 56,389
continuing
operations before
extraordinary item
Discontinued (5,783) (5,236) (4,056) (8,775) -0- -0- -0-
operations, net of
tax benefits
Gain on 9,161 -0- -0- -0- -0- -0- -0-
extraordinary
item--excess of
face value of debt
retired over cost,
net of taxes
Net income $12,620 $3,825 $26,559 $21,161 $45,243 $31,197 $56,389
Primary earnings per
share:
From continuing $0.44 $0.43 $1.24 $1.08 $1.63 $1.12 $1.88
operations
From discontinued (0.28) (0.25) (0.15) (0.32) -0- -0- -0-
operations
Extraordinary item $0.44 -0- -0- -0- -0- -0- -0-
-----------------------------------------------------------------------------------------------------------
$0.60 $0.18 $1.09 $0.76 $1.63 $1.12 $1.88
===========================================================================================================
Fully diluted earnings
per share:
From continuing $0.44 $0.43 $1.21 $1.08 $1.56 $1.12 $1.88
operations
From discontinued (0.28) (0.25) (0.14) (0.32) -0- -0- -0-
operations
Extraordinary item 0.44 -0- -0- -0- -0- -0- -0-
-----------------------------------------------------------------------------------------------------------
$0.60 $0.18 $1.07 $0.76 $1.56 $1.12 $1.88
===========================================================================================================
Weighted average
number of shares
of common stock
and common stock
equivalents
Primary 20,951,282 20,968,969 27,532,308 27,703,163 27,820,798 27,789,250 30,094,608
Fully diluted 20,951,282 20,968,969 29,418,899 27,703,163 29,824,571 27,789,250 30,094,608
Ratios of earnings 1.38x 1.44x 3.55x 4.04x 5.11x 4.84x 6.31x
to fixed charges
(1)
<PAGE>
June 30, March 24, 1996
1995
-----------------------------------------
Actual As Adjusted (2)
------------------ -------------------- ------------------
Consolidated Balance Sheet Data: (In thousands)
Working capital $280,124 $ 496,619 $ 777,587
Total assets 981,292 1,243,817 1,524,785
Long-term debt, less current maturities 156,370 285,320 566,288
Shareholders' equity 349,776 446,813 446,813
---------------
<FN>
(1) The ratios of earnings to fixed charges were calculated by dividing
interest expense and amortization of debt expenses into the sum of income
from continuing operations before income taxes and such fixed charges, and
extraordinary items.
(2) Adjusted to reflect the sale of $287,500,000 of the Notes which resulted in
net proceeds to the Company of $280,968,395. See "Use of Proceeds" and
"Capitalization."
</FN>
</TABLE>
<PAGE>
RISK FACTORS
This Prospectus contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. Actual
results could differ materially from those projected in the forward-looking
statements as a result of certain of the risk factors set forth below and
elsewhere in this Prospectus. An investment in the Notes involves the following
risks, which, together with other matters set forth in this Prospectus, should
be carefully considered by investors prior to any purchase of the Notes.
Customer Concentration and Dependence on the Electronics Industry
A majority of the Company's revenues are derived from direct sales to
original equipment manufacturers and the U.S. Government and its prime
contractors. Although the Company has several hundred customer accounts,
experience has indicated that a significant percentage of sales are attributed
to a limited group of customers in any particular period. Sales to individual
customers that exceeded 10% of annual consolidated sales for each of the last
three fiscal years were: Hewlett-Packard Company, $1,049 million in 1995 and
$436 million in 1994; International Business Machines Corporation, $326 million
in 1994; Conner Peripherals, Inc., $229 million in 1993; and Dell Computer
Corporation, $280 million in 1993. In the year ended June 30, 1995, the
Company's ten largest customers contributed more than 70% of revenues. The loss
of any major customer, without offsetting orders from other sources, could have
a material adverse effect on the Company.
The percentage of the Company's sales to its major customers may fluctuate
from period to period. Significant reductions in sales to any of these customers
could have a material adverse effect on the Company's results of operations.
Customer contracts can be canceled and volume levels can be changed or delayed.
The timely replacement of canceled, delayed, or reduced contracts with new
business cannot be assured. These risks are exacerbated because a majority of
the Company's sales are to customers in the electronics industry, which is
subject to rapid technological change and product obsolescence. The factors
affecting the electronics industry in general, or any of the Company's major
customers in particular, could have a materially adverse effect on the Company's
results of operations.
The majority of the Company's accounts receivable are from customers in the
high technology industry. Credit terms are extended to customers after
performing credit evaluations, which continue throughout a customer's contract
period. Letters of credit or other security are generally requested from
customers when the Company believes significant credit risks or financial
exposure may exist. However, credit losses have occurred in the past, and no
assurances can be given that credit losses, which could be material, will not
reoccur.
Growth Management
The Company has experienced substantial growth in recent years, with net
sales increasing from $1.12 billion in fiscal year 1991, to $2.67 billion in
fiscal 1995 and to $3.19 billion in the first nine months of fiscal year 1996.
In recent years, the Company has acquired facilities in several locations and
the Company may acquire or build additional facilities from time to time in the
future. There can be no assurance that the Company's historical revenue growth
will continue or that the Company will successfully manage other plants it may
acquire or build in the future. As the Company manages its existing operations
and expands geographically, it may experience certain inefficiencies as it
integrates new operations and manages geographically dispersed operations. In
addition, the Company's results of operations could be adversely affected if its
new facilities do not achieve growth sufficient to offset increased expenditures
associated with geographic expansion. Should the Company increase its
expenditures in anticipation of a future level of sales which does not
materialize, its profitability would be adversely affected. On occasion,
customers may require rapid increases in production which can stress the
Company's resources.
Seasonality
The Company has historically not considered its business to be consistently
seasonal, although seasonal demands for its customers' products sold to
consumers may impact quarterly revenues. In recent periods, however, the
proportion of the Company's customers' products ultimately sold to retail
consumers has significantly expanded, which has increased seasonality in the
Company's sales. The Company believes this trend may continue.
Global Business Considerations
The Company conducts its business on a multinational basis, with the
majority of its revenue generated in the United States but with significant
foreign activities. U.S. export and foreign sales from continuing operations
totaled approximately $1,187 million in 1995, $778 million in 1994, and $744
million in 1993, representing 44% of total sales in 1995, 42% in 1994, and 45%
in 1993. The Company sources material for much of its business, domestic
included, from international suppliers. The Company is subject to the risk of
currency fluctuations, possible restrictions on transfer of funds from time to
time, and the burden and cost of compliance with a variety of state and foreign
laws. While to date these factors have not had a material adverse impact on the
Company's results of operations, there can be no assurance that they will not
have such an impact in the future.
Competition and Other Factors
The Company competes in the electronics equipment industry against numerous
domestic and foreign companies. The Company also faces competition from current
and prospective customers, which evaluate the Company's capabilities against the
merits of manufacturing their products internally. The Company competes with
different companies depending on the type of service sought and the geographic
area of competition. Competition in the industry is intense and the Company
believes this condition will continue. A number of competitors are larger than
the Company and have significantly greater resources, while a number of
competitors are smaller with fewer resources. The Company could be adversely
affected if its competitors introduce superior or significantly lower priced
services or products.
To remain competitive, the Company will be required to continue to develop
and provide technologically advanced engineering and manufacturing services,
maintain quality levels, offer flexible delivery schedules, deliver finished
products on a reliable basis, and continue to compete favorably on the basis of
price. Further, the Company will be required to continuously update its internal
information and management systems. The Company believes that maintaining and
updating its internal systems is important to obtaining future, and maintaining
existing, contracts. Failure to satisfy any of the foregoing requirements could
materially affect the Company's competitive position.
Component Availability
The Company sources its materials on a global basis. Component availability
is periodically subject to constraints, shortages, and abundances. Although no
assurances can be given, the Company has generally been able to obtain adequate
components to maintain most production in periods of shortages, however,
shipment delays have occurred and may periodically reoccur. Significant
constraints on component availability could adversely affect the Company. When
shortages and excesses have occurred the Company has generally passed on
increased or reduced costs to its customers.
Possible Termination of Government Programs
The Company's contracts with the U.S. Government and its prime contractors
are subject to audit and termination at the election of the Government. On
January 7, 1991, the U.S. Government canceled the A-12 Aircraft program for
which the Company was a major subcontractor; in October 1991, one of the prime
contractors filed suit against the Company claiming default on certain
subcontracts with respect to which the Company has an inventory exposure of
approximately $22 million. (See Note G to the Company's 1995 Consolidated
Financial Statements, incorporated herein by reference.) The Company believes
that its ongoing principal government programs will continue to be funded, but
there can be no assurance to that effect. Although the termination of multiple
government related programs could adversely affect results, no current
government program accounts for more than 1% of consolidated revenue.
Dependence on Key Personnel
The Company's success depends to a large extent upon the efforts and
abilities of key managerial and technical employees. The loss of services of
certain key personnel could have a material adverse effect on the Company. The
Company's business also depends upon its ability to recruit and retain senior
managers and skilled professional and technical salaried personnel, for which
there is intense competition, and its ability to recruit, train, and retain
skilled and semiskilled hourly employees at competitive costs, and the failure
to do so could adversely affect the Company's results of operations.
Environmental Compliance
The Company is subject to a variety of environmental regulations relating
to the use, storage, discharge and disposal of hazardous chemicals used during
its manufacturing processes. ANY failure by the Company to comply with present
and future regulations could subject it to future liabilities or the suspension
of production. In addition, such regulations could restrict the Company's
ability to expand its facilities or could require the Company to acquire costly
equipment or to incur other significant expenses to comply with environmental
regulations.
Volatility of Market Price of Common Stock and Notes
The trading price of the Common Stock is subject to significant
fluctuations in response to variations in quarterly operating results, general
conditions in the electronics industry, and other factors. In addition, the
stock market is subject to price and volume fluctuations which affect the market
price for many high technology companies in particular, and which often are
unrelated to operating performance. Fluctuations in the trading price of the
Common Stock will affect the trading price of the Notes offered hereby.
Subordination
The Notes will be unsecured and subordinated in right of payment in full to
all existing and future Senior Indebtedness of the Company. As a result of such
subordination, in the event of any insolvency, liquidation or reorganization of
the Company or upon acceleration of the Notes due to an Event of Default, the
assets of the Company will be available to pay obligations on the Notes and any
other subordinated indebtedness of the Company only after all Senior
Indebtedness has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on any or all of the Notes and any other
subordinated indebtedness of the Company then outstanding. The Notes are
effectively subordinated to the liabilities, including trade payables, of the
Company's subsidiaries. The Indenture does not prohibit or limit the incurrence
of Senior Indebtedness or the incurrence of other indebtedness and other
liabilities by the Company or its subsidiaries. As of March 24, 1996, the
Company had approximately $217 million of indebtedness outstanding that would
have constituted Senior Indebtedness and the subsidiaries of the Company had
approximately $580 million of outstanding indebtedness and other liabilities.
The Company is a holding company. Consequently its ability to service its
debt, including the Notes offered hereby, is dependent upon the earnings from
the business conducted by the Company through its subsidiaries and the
distribution of those earnings, or upon loans or other payments of funds, by
those subsidiaries to the Company, all of which could be subject to statutory or
contractual restrictions, are contingent upon the subsidiaries' earnings and are
subject to various business considerations. See "Description of
Notes--Subordination of Notes."
Limitation on Repurchase of Notes Upon Designated Event
Upon the occurrence of a Designated Event, each holder of Notes may require
the Company to repurchase all or a portion of such holder's Notes. If a
Designated Event were to occur, there can be no assurance that the Company would
have sufficient financial resources, or would be able to arrange financing, to
pay the repurchase price for all Notes tendered by holders thereof. In addition,
the terms of certain of the Company's existing debt agreements prohibit the
Company from purchasing any Notes under certain conditions and also identify
certain events that would constitute a Change in Control, as well as certain
other events with respect to the Company or certain of its subsidiaries, that
would constitute an event of default under such debt agreements. ANY future
credit agreements or other agreements relating to other indebtedness (including
other Senior Indebtedness) to which the Company becomes a party may contain
similar restrictions and provisions. In the event a Change in Control occurs at
a time when the Company is prohibited from purchasing the Notes, the Company
could seek the consent of its lenders to the purchase of the Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such consent or repay such borrowings, the Company would
remain prohibited from purchasing Notes. In such case, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the Indenture
which would, in turn, constitute a further default under certain of the
Company's existing debt agreements and may constitute a default under the terms
of other indebtedness that the Company may enter into from time to time. In such
circumstances, the subordination provisions in the Indenture would prohibit
payments to the holders of Notes. See "Description of Notes--Repurchase at
Option of Holders Upon Occurrence of Designated Event."
Absence of Trading Market for the Notes
The Notes were issued in April 1996 to a small number of institutional
buyers and non-U.S. persons. The Registration Statement of which this Prospectus
forms a part is filed pursuant to the Registration Agreement, which does not
obligate the Company to keep the Registration Statement effective after the
third anniversary of the date when the Registration Statement is declared
effective or, if earlier, the date when all the Notes and the Common Stock
issuable on conversion thereof covered by the Registration Statement have been
sold pursuant to the Registration Statement. The Company does not intend to
apply for listing of the Notes on any securities exchange or to seek approval
for quotation through any automated quotation system. Accordingly, there can be
no assurance as to the development or liquidity of any market for the Notes.
Fountain Transaction
The Fountain Transaction will increase the Company's expenses and working
capital requirements, and place burdens on the Company's management resources.
The Fountain Transaction entails a number of risks, including successfully
managing the transition of the Fountain Facility to the Company. In the event
the Company is unsuccessful in these efforts, the Company's results of
operations could be materially adversely affected. It is anticipated that a
portion of the manufacturing capacity of the Fountain Facility will be used to
manufacture products under contract for Apple; fluctuation in the demand for
Apple products could adversely affect the Company's results of operations.
<PAGE>
USE OF PROCEEDS
The Selling Holders will receive all of the net proceeds from the sale of Notes
and Common Stock pursuant to this Prospectus.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
There is no established trading market for the Notes. The Company's Common
Stock is included for trading on the Nasdaq National Market System under the
symbol "SCIS." The following table sets forth for the periods indicated the high
and low closing prices for the Company's Common Stock, as quoted on the Nasdaq
National Market System.
High Low
------------------------------
Fiscal year ended June 30, 1994
First Quarter $21 3/8 $14 3/8
Second Quarter 19 7/8 15 3/8
Third Quarter 21 5/8 15 1/4
Fourth Quarter 17 12 5/8
Fiscal year ended June 30, 1995
First Quarter 22 1/4 14 3/4
Second Quarter 22 16
Third Quarter 19 1/2 17
Fourth Quarter 26 17 1/2
Fiscal year ending June 30, 1996
First Quarter 38 28 5/8
Second Quarter 37 3/4 23 7/8
Third Quarter 43 3/8 25 3/4
Fourth Quarter 49 3/8 35 3/8
Fiscal year ending June 30, 1997
First Quarter (through July 17, 1996) 49 3/8 31 1/2
On July 17, 1996, the last sale price of the Common Stock as reported
on the Nasdaq National Market System was $34.375 per share.
The Company has not paid any cash dividends on its Common Stock and has no
plans to pay cash dividends on its Common Stock in the foreseeable future. The
payment of cash dividends is limited under the Company's credit facility, and
accordingly, $47 million of retained earnings, as of March 24, 1996, are
available for payment of cash dividends.
<TABLE>
CAPITALIZATION
The following table sets forth the Company's capitalization as of March 24,
1996, and as adjusted to give effect to the issuance and sale by the Company of
the Notes offered hereby.
<CAPTION>
March 24, 1996
-------------------------------------
Actual As Adjusted (1)
----------------- ------------------
(In thousands, except share data)
Current maturities of long-term debt $ 5,803 $ 5,803
<S> <C> <C>
----------------- ------------------
Long-term debt:
5% Convertible Subordinated Notes due 2006 -0- 280,968
Other long-term debt 285,320 285,320
----------------- ------------------
Total long-term debt 285,320 566,288
----------------- ------------------
Shareholders' equity:
Preferred Stock, 500,000 shares authorized; -0- -0-
none issued and outstanding
Common Stock, 100,000,000 shares authorized; 169,963 169,963
29,510,262 shares issued and outstanding (2)
Retained earnings 283,584 283,584
Cumulative translation adjustment (6,734) (6,734)
----------------- ------------------
Total shareholders' equity 446,813 446,813
----------------- ------------------
Total capitalization $ 737,936 $ 1,018,904
================= ==================
----------------
(1) Does not include the impact of the issuance in July 1996 of $100
million of senior unsecured notes, and the June 1996 $90 million
increase in commitments under current credit facilities to $410
million from $320 million. See "Risk Factors -- Subordination"
and Footnote B of the Financial Statements of the Company
included in its Annual Report on Form 10-K for the year ended
June 30, 1995.
(2) Outstanding Common Stock as of March 24, 1996, does not include (I)
2,093,100 shares of Common Stock available for issuance pursuant to
the Company's stock option plans, of which 1,265,000 shares were
subject to outstanding options, and (ii) 5,897,435 shares of Common
Stock reserved for issuance upon the conversion of the Notes.
</TABLE>
<PAGE>
<TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected data presented under the captions "Consolidated Statements of
Income Data" and "Consolidated Balance Sheet Data" for, and as of the end of,
each of the years in the five year period ended June 30, 1995, are derived
from the consolidated financial statements of the Company audited by Ernst &
Young LLP, independent auditors. The selected data presented below for the
nine month periods ended March 26, 1995, and March 24, 1996, are derived from
the unaudited consolidated financial statements of the Company. These results
are not necessarily indicative of results to be expected for any future
period. The data should be read in conjunction with the consolidated financial
statements, related notes and other financial information incorporated by
reference herein.
<CAPTION>
Nine Months Ended
-----------------------------
Year Ended June 30, March 26, March 24,
1995 1996
------------------------------------------------------------------------------
1991 1992 1993 1994 1995
----------------------------------------------------------------------------------------------------------
(In thousands, except ratios and per share data)
Consolidated Statement of
Income Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ $ $ $ $ $ $
1,121,807 1,038,454 1,672,115 1,852,478 2,673,783 1,831,431 3,192,873
Cost and expense 1,097,446 1,019,868 1,614,096 1,791,770 2,582,739 1,769,881 3,081,393
----------------------------------------------------------------------------------------------------------
Operating income 24,361 18,586 58,019 60,708 91,044 61,550 111,480
Interest expense (22,400) (15,479) (16,793) (15,423) (18,400) (13,334) (17,861)
Other income, net 6,524 3,695 1,657 1,631 3,017 2,927 1,153
----------------------------------------------------------------------------------------------------------
Income from continuing 8,485 6,802 42,883 46,916 75,661 51,143 94,772
operations before
income taxes and
extraordinary item
Income taxes (credit) (757) (2,259) 12,268 16,980 30,418 19,946 38,383
----------------------------------------------------------------------------------------------------------
Income from continuing 9,242 9,061 30,615 29,936 45,243 31,197 56,389
operations before
extraordinary item
Discontinued operations (5,783) (5,236) (4,056) (8,775) -0- -0- -0-
(net of income tax
benefit of $323 in 1991,
$551 in 1992, $1,420 in
1993 and $5,838 in 1994)
Gain on extraordinary item 9,161 -0- -0- -0- -0- -0- -0-
- excess of face value of
debt retired over cost
(net of income taxes of
$4,720)
----------------------------------------------------------------------------------------------------------
Net income $ 12,620 $3,825 $26,559 $21,161 $45,243 $31,197 $56,389
==========================================================================================================
Primary earnings
per share:
From continuing $0.44 $0.43 $1.24 $1.08 $1.63 $1.12 $1.88
operations
From discontinued (0.28) (0.25) (0.15) (0.32) -0- -0- -0-
operations
Extraordinary item 0.44 -0- -0- -0- -0- -0- -0-
----------------------------------------------------------------------------------------------------------
$0.60 $0.18 $1.09 $0.76 $1.63 $1.12 $1.88
==========================================================================================================
Fully diluted earnings
per share:
From continuing $0.44 $0.43 $1.21 $1.08 $1.56 $1.12 $1.88
operations
From discontinued (0.28) (0.25) (0.14) (0.32) -0- -0- -0-
operations
Extraordinary item 0.44 -0- -0- -0- -0- -0- -0-
----------------------------------------------------------------------------------------------------------
$0.60 $0.18 $1.07 $0.76 $1.56 $1.12 $1.88
==========================================================================================================
Weighted average number
of shares of common
stock and common stock
equivalents
Primary 20,951,282 20,968,969 27,532,308 27,703,163 27,820,798 27,789,250 30,094,608
Fully diluted 20,951,282 20,968,969 29,418,899 27,703,163 29,824,517 27,789,250 30,094,608
Ratios of earnings to fixed 1.38x 1.44x 3.55x 4.04x 5.11x 4.84x 6.31x
charges (1)
</TABLE>
<TABLE>
<CAPTION>
June 30, March 24,
-----------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
---------------------------------------------------------------------------------------------------------
Consolidated Balance
<S> <C> <C> <C> <C> <C> <C>
Sheet Data: (In thousands)
Working capital $ 253,677 $ 255,270 $336,516 $395,628 $280,124 $ 496,619
Total assets 550,935 612,962 780,339 920,212 981,292 1,243,817
Long-term debt 233,687 219,246 249,243 278,401 156,370 285,320
Shareholders' e 185,909 192,349 277,856 304,634 349,776 446,813
- -------------------
<FN>
(1) The ratios of earnings to fixed charges were calculated by dividing
interest expense and amortization of debt expenses into the sum of income
from continuing operations before income taxes and such fixed charges, and
extraordinary item.
</FN>
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Management's Discussion and Analysis of Financial Condition and Results
of Operations contained in the Company's Annual Report on Form 10-K for the year
ended June 30, 1995, and the Company's Quarterly Report on Form 10-Q for the
quarter ended March 24, 1996, which are incorporated herein by reference.
Additionally, see pages 2 and 3 of the Company's 1995 Annual Report to
Shareholders, which is incorporated herein by reference, for further fiscal year
1995 management discussion and analysis information.
BUSINESS
SCI Systems is the largest global supplier of full-service contract
manufacturing to the electronics industry, providing a broad range of
manufacturing services to original equipment manufacturers (OEMs) in the
computer, telecommunications, medical, aerospace and defense, and entertainment
industries. SCI's strategically located plants in North America, Western Europe
and East Asia manufacture components, subassemblies, and finished products for
the Company's diversified and growing base of commercial customers, including
Hewlett-Packard, Tandem Computers, IBM, Apple Computer, and Digital Equipment
Corporation. The Company operates the largest surface mount technology (SMT)
capacity in the merchant market with 148 automated SMT lines and 42 automated
pin-in-hole (PIH) assembly lines installed in twenty plants in eight countries.
Electronics Manufacturing Services (EMS) Industry
SCI was an early proponent of electronics manufacturing outsourcing by
large original equipment manufacturers (OEMs). Continued growth of such
outsourcing has led to the development of a sizable industry. The EMS industry
is believed by the Company to generate in excess of $30 billion dollars in
annual revenues (an estimated 8 to 12% of the total electronics equipment
market) and to be growing at an annual rate in excess of 25%. Factors driving
the growth of OEMs outsourcing include intense cost pressures, much shorter
product cycles, capital requirements, lean internal support structures,
increasingly dynamic market conditions, and rapid globalization. As outsourcing
has grown in volume, it has also grown in scope to include such areas as product
design, materials sourcing, product distribution, and after-sales support.
Benefits to OEMs of outsourcing include lower product, development, and support
costs; reduced capital requirements for both fixed assets and inventories;
availability of "capacity elastic" resources; enhanced geographic flexibility;
and ready availability of advanced manufacturing processes and information
systems. As the largest supplier of full service contract manufacturing to the
international electronics industry, SCI is benefiting from an ongoing shift to
outsourcing as OEMs seek solutions to increasing competitive pressures.
Company Focus Areas
The key elements of SCI's focus are quality products, competitive pricing
and customer responsiveness. The Company implements this philosophy through the
continuous upgrading of its technology and systems, geographic expansion to
remain close to customers and management commitment to quality improvement. The
Company is committed to maintaining modern manufacturing technologies, with
current equipment additions focusing on evolving SMT processes and a range of
microelectronic assembly processes. The Company has also expanded the number of
production lines devoted to finished product assembly, burn-in and test to meet
a growing number of customers' requirements.
An essential element of the Company's infrastructure is a multitiered
configuration of information systems which utilize both standard and customized
software to implement advanced applications at mainframe, server, and desktop
levels. Significant upgrades and expansions of system hardware, software and
communications elements have been implemented. These systems are increasingly
interlinked with counterpart customer systems to implement order flow,
production status information, billing, and material management in a timely
manner.
The Company maintains a continuous program of manufacturing process,
system, and product development. Computer aided design centers are employed at
strategic regional plants in support of domestic and foreign customers. Much of
the Company's design automation emphasis is currently focused upon surface mount
technology and advanced manufacturing processes. New product development is
usually undertaken in support of customer requirements.
All of the Company's manufacturing facilities are registered to the quality
requirements of the International Organization for Standardization (ISO 9000),
as is its purchasing organization. The Company has received numerous quality
awards from its customers which include many of the largest personal computer
and peripheral product OEMs.
Global Operations
Commercial Division
The Commercial Division is a multinational business organized for
management purposes into plant groups within five geographical regions: the
Central, Eastern, and Western Regions of North America, the Asian Region, and
the European Region. The Commercial Division performs computer aided design,
component procurement and test, subassembly and finished unit production,
product test, product distribution, after-sales service, and a full range of
engineering support for a sizable number of customers.
Central Region. The Central Region operates plants in Huntsville and Arab,
Alabama, and Guadalajara, Mexico. The plants serve customers throughout the
Southeastern and Southwestern U.S. and Latin America. A growing nonregional
customer base is resulting from the attractiveness of Mexico as a low cost
manufacturing location and the Region's expanding personal computer final
assembly and distribution capabilities.
One Huntsville plant provides electronic assemblies and a mix of finished
products to a diversified customer base. Certification to FDA standards is
important to its success as a supplier of medical devices and instruments. This
plant, the most diversified in the Central Region, also has active contracts in
the computer, telecommunications, and digital television arenas. Considerable
growth in finished product activities has resulted from production contracts for
video terminals and networked client computers, patient monitoring equipment,
modem products, and digital television reception units. This plant is also one
of SCI's primary technology development centers and an early production site for
advanced processes.
A second Huntsville plant provides a full range of design, engineering,
manufacturing, and distribution services. Much of SCI's success in the highly
competitive personal computer market results from this plant's innovative
products which are brought to market in minimum time, custom manufactured in
large volumes, and shipped directly to multiple market channels. Internally
developed systems that process orders electronically, track manufacturing
activities online, and support direct shipment to distribution have proved
important to the rapid growth of SCI's finished product business.
The Arab plant is a high-volume producer of computer assemblies and has
become a key supplier of subassemblies for finished products produced in other
company plants. The facility also has capabilities in manufacturing and
distributing finished products.
The plant in Guadalajara is experiencing growth as a result of demand from
both U.S. and Latin American customers and is being expanded through new
construction to accommodate increasing orders. Increased capital expenditures
have significantly increased the plant's capacity for surface mount electronic
assembly. The plant is benefiting from customer base expansion, adding camera
and printer electronics to an existing base of computer motherboard and disk
controller products.
Eastern Region. The Eastern Region, with established plants in Graham,
North Carolina; Hooksett, New Hampshire; and Dorval, Quebec, Canada; was
expanded during fiscal year 1995 with the addition of a plant in Augusta, Maine.
The Region serves customers in the Eastern United States and Canada.
In April 1995 the Company acquired Digital Equipment Corporation's contract
manufacturing business and its manufacturing facility in Augusta, Maine. SCI
also entered into a multiyear agreement to supply Digital with networking
electronics produced at that plant.
The North Carolina facility continues to focus on manufacturing Local Area
Network (LAN) and Wide Area Network (WAN) interfaces, routers, and bridges and
has expanded its activities to include sub-notebook computer assemblies for
several of a major customer's applications. The facility also has customers in
the office products and automotive electronics markets.
The New Hampshire plant serves the electronics community of the Boston area
as well as others throughout the Northeast. The markets for communication
products, computers and related peripheral devices, and medical instruments
offer significant opportunity for that plant.
The Canadian operation is positioned to satisfy requirements coming from an
expanding number of Canadian customers and multinationals requiring Canadian
content. Surface mount technology capacity has been added and final assembly,
packaging, and distribution activities have been expanded. The product mix has
expanded to include a variety of computer processors and interface devices and
several types of data and voice telecommunications electronics.
Western Region. The Western Region provides a range of contract
manufacturing services from plants in San Jose and Watsonville, California;
Colorado Springs, Colorado; and Rapid City, South Dakota. It serves a
diversified group of West Coast, Mountain, and Plains States customers.
The San Jose facility benefits from its strategic location in Silicon
Valley. Its diverse customer base is provided a broad range of services
including new product design and introduction support, prototype assembly and
early production, low and high volume production of a range of assemblies, and
finished product manufacturing. The facility often serves as a sister plant to
several other SCI plants as they exchange customer support functions with each
other.
The Watsonville plant, while retaining its focus upon supporting the growth
of its major customer, is following a conservative diversification strategy. The
plant provides requisite capacity, responsiveness, and flexibility while
positioning the operation for transition from a dedicated "feeder" plant to one
of full service, multiple customer manufacturing. The plant's proximity to
Silicon Valley positions it to expand its customer base from the Valley's
cluster of high technology companies.
The Colorado Springs plant experienced steady growth throughout fiscal year
1995 and is currently being expanded through new construction. It has
established itself as the largest contract manufacturing service provider to the
Rocky Mountain high technology marketplace and has considerable experience in
producing assemblies for computers, tape drives, disk array systems, and optical
disk products.
The Rapid City plant has migrated in recent years from primarily supplying
electronic assemblies for a single customer's mass storage devices to
manufacturing products which span a wide range of applications, complexities,
volumes, and selling prices. Significant growth has occurred in the production
of complex mainframe assemblies and personal computer electronics. Customer and
product diversification has resulted from the addition of multiple medical and
industrial automation products, as well as electronics for a major customer's
high performance video display units.
Asian Region. The Asian Region operates facilities in the Republic of
Singapore and Pathum Thani Province (a suburb of Bangkok), Thailand. These
plants support regional Asian customers as well as U.S. and European
multinationals that prefer Asian manufacturing sources. Substantial revenue
growth and market diversification has been generated by both facilities as the
Company retains its market leadership in the Region.
The Singaporean plant continues to experience demand from several of its
larger multinational computer and peripheral customers. New products introduced
for existing customers have included computer network management devices and
printer controllers. As contracts for substantial volumes of memory modules have
been received, the plant has dedicated a manufacturing module to that type
product. The plant has diversified beyond its historical strength in disk drive
electronics by adding customers for medical and tape drive electronics. The
plant's process efficiencies and quality yields have combined with new
technology and equipment additions to promote competitive performance in
Singapore's maturing economy.
The Thai plant's recent focus has been on management enhancement, systems
implementation, and capacity expansion in support of continuing growth through
new product introductions. The plant has received new contracts from a European
network products company and continues its role as a producer of controller
electronics for several leading mass storage device companies. Growth there has
been stimulated by a very competitive cost structure.
The Company believes opportunities for Asian volume growth and further
product and technology diversification are available. These considerations,
along with opportunities to serve a concentration of existing customers'
operations in an additional regional country, are the impetus for a third Asian
plant being constructed on a "green field" basis in Malaysia and scheduled for
completion in fiscal year 1997.
European Region. The European Region operates facilities in Irvine,
Scotland; Fermoy, County Cork, Ireland; and Grenoble, France. These plants serve
their respective in-country customers while collectively supporting large
multinational customers' European operations. They also serve an emerging market
for contract manufacturing services for local customers throughout Continental
Europe.
The Grenoble operation occupied a newly constructed building during fiscal
year 1995, approximately one year after the Company acquired Hewlett-Packard's
Grenoble Surface Mount Center. The new facility has installed additional
machinery to meet growing customer requirements. The plant is well positioned to
support its major customer's European growth and pursue a customer
diversification strategy as European companies increasingly adopt broader
manufacturing outsourcing strategies.
The Scottish plant continues to be a supplier of a wide range of electronic
assemblies to the computer industry. Diversification into mobile and fixed base
telecommunications has been initiated along with memory assemblies and high
performance video display electronics. The Irvine facility plays an increasing
role in supporting a number of the Company's global customers and is well
positioned for substantial future growth.
The Region operates a design center in the Scottish plant which provides
product development support and engineering services to the European market. The
computer, telecommunication, and automotive sectors are representative of those
that are benefiting from improved product functionality, manufacturability, and
lower cost through the use of the design center's services.
The Irish facility continues to support a number of local and multinational
customers with whom the Company has ongoing or potential multiplant business.
The plant is involved in a number of projects for two of the world's largest
telecommunications companies. The plant now has considerable finished product
assembly experience to balance its capabilities and is positioned to benefit
from the growth of major companies' established and developing Irish operations.
Government Division
The Government Division provides a wide range of high performance systems
and subsystems used by U.S. and foreign governments, defense and aerospace
companies, and others requiring high reliability and ruggedized equipment. Its
primary engineering and manufacturing operations are carried out in facilities
located in Huntsville and Lacey's Spring, Alabama. The Division designs and
manufactures electronic and electromechanical systems and subsystems for launch
vehicle, satellite, aircraft, and surface applications. Primary technology
emphasis includes instrumentation, voice and data communications, and computers.
Current production includes voice and communication control systems for the
F-15, F-16, F-18, and AV-8 aircraft; the FAA Rapid Development Voice System; and
the Advanced Airborne Test Instrumentation System. The first cesium atomic
clocks for a new block of Global Positioning System (GPS) satellites were
delivered in fiscal year 1995 and the Division continued production of the
Government's GPS User Equipment. Deliveries of Fiber Optic Terminal Equipment
for NASA started during fiscal year 1995. Production continues of a family of
gas cabinets for semiconductor manufacturing and for ruggedized electronics for
railroad locomotives.
The Advanced Lighting Control System for the C-130H aircraft has entered
production. The ARINC-629 Current Mode Coupler (CMC) and Standard Interface
Module (SIM) for the fly-by-wire Boeing 777 aircraft also are in early
production. Digital Audio Intercommunications Equipment for the V-22 and C-130J
aircraft has completed design and entered qualification testing. The Common
Airborne Instrumentation System has begun prototype production.
New contracts received include portable workstations for the U.S. Navy;
computers for the U.S. Army's Apache Longbow Helicopter; Non-Volatile Memory
Modules for the Japanese FSX Aircraft; Satellite Communication terminals for
tracking in the transportation industry; control systems for transportation
equipment; F-15 aircraft communications equipment for Israel; Advanced Interface
Blanker Units (AIBU) for the MH53J Helicopter; gunner's consoles, fiber optic
bobbins, and local area networks for the U.S. Army Enhanced Fiber Optic Guided
Missile (E-FOGM); solid state power controllers for the Space Station; and
proofing printers for the graphic arts industry.
Manufacturing Capabilities
The Company remains committed to modern manufacturing technologies. Surface
mount technology (SMT) is the electronics assembly technique of growing
preference. It offers smaller size, lower cost and higher reliability than
competing manufacturing processes. Ongoing equipment additions focus on evolving
SMT processes. Barriers to entry into SMT assembly are high, as it is process
sensitive, design critical and capital intensive. The Company currently operates
148 automated SMT assembly lines, making SCI one of the largest SMT producers in
the world and the leader in the merchant market.
The Company is also skilled in the automation of traditional pin-in-hole
(PIH) electronics assembly using printed circuit boards and leaded components.
Although conceptually several decades old, there remains a significant
continuing market for this technology. SCI operates a total of 42 automated PIH
assembly lines in various plants.
The Company has expanded its number of production lines for finished
product assembly, burn-in and test to meet growing demand and increased customer
requirements, including rapid shipment directly to distribution channels and end
users. The Company anticipates significant growth of, and wider deployment of,
these capabilities to support future growth.
The Company's manufacturing capabilities are supported by state-of-the-art
information systems and a continuing program of manufacturing process, system
and product development. The Company has implemented a multitiered configuration
of information systems which utilize both standard and customized software to
implement advanced applications at the mainframe, server, and desktop levels.
These systems are increasingly interlinked with counterpart customer systems to
implement order flow, production status information, billing, and material
management in a timely manner. Computer aided design centers are employed at
strategic regional plants in support of domestic and foreign customers. Much of
the Company's design automation emphasis is currently focused upon SMT and
advanced manufacturing processes.
All of the Company's plants are registered to the rigorous quality
requirements of the International Organization of Standardization (ISO 9000), as
is its purchasing organization.
Recent Developments
The following paragraph contains certain forward-looking statements and
potential investors should carefully review the "Risk Factors" section of this
Prospectus with respect to such forward-looking statements.
On May 31, 1996 the Company finalized an agreement with Apple to purchase
the 360,000 square foot Fountain Facility. The Fountain Facility currently
provides manufacturing services in support of Apple's product requirements for
the Americas. The Fountain Facility manufactures subassemblies and finished
computers for Apple, and employed approximately 1,000 employees. The cash
acquisition price aggregated $195 million.
Additionally, the Company entered into a related three year manufacturing
agreement with Apple. The manufacturing agreement provides that the Company will
manufacture agreed upon levels of designated Apple products. The Company expects
the Fountain Transaction to result in significant volume of business. The
Fountain Facility will also provide the Company with manufacturing capacity for
potential use by other customers.
<PAGE>
DESCRIPTION OF NOTES
General
The Notes were issued pursuant to an Indenture dated as of April 23, 1996
(the "Indenture"), between the Company and PNC Bank, Kentucky, Inc., as trustee
(the "Trustee"). The following summary of certain provisions of the Indenture
does not purport to be complete and is qualified in its entirety by reference to
the Indenture, including the definitions in the Indenture of certain terms used
in the following summary. The definitions of certain terms used in the following
summary are set forth below under "--Certain Definitions."
The Notes are the unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness of the Company
to the extent set forth in the Indenture. The Indenture does not limit the
amount of other Indebtedness or securities that may be issued by the Company or
any of its Subsidiaries.
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Company is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Notes. As a result,
the Notes are effectively subordinated to all existing and future Indebtedness
and other liabilities and commitments of such Subsidiaries.
The Notes have been approved for trading in the PORTAL Market.
<PAGE>
Principal, Maturity and Interest
The Notes bear interest from April 23, 1996, at the rate per annum set
forth on the cover page of this Prospectus and will mature on May 1, 2006.
Interest on the Notes is semiannually on May 1 and November 1 of each year
(each an "Interest Payment Date"), commencing on November 1, 1996, to holders of
record at the close of business on the April 15 or October 15 (each a "Regular
Record Date") immediately preceding such Interest Payment Date. Interest is
computed on the basis of a 360-day year comprised of twelve 30-day months.
Interest on the Notes accrues from the most recent date to which interest
has been paid or, if no interest has been paid, from April 23, 1996.
The Notes are payable both as to principal and interest at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of interest may be made by
check mailed to the holders of the Notes at their respective addresses set forth
in the register of holders of Notes. Until otherwise designated by the Company,
the Company's office or agency in New York is the office of the Trustee
maintained for such purpose. The Notes are issued in registered form, without
coupons, and in denominations of $1,000 and integral multiples thereof.
Optional Redemption
The Notes are not subject to redemption prior to May 1, 1999 and will be
redeemable on such date and thereafter at the option of the Company, in whole or
in part (in any integral multiple of $1,000), upon not less than 30 nor more
than 60 days' prior notice by mail at the following redemption prices (expressed
as percentages of the principal amount), in each case together with accrued
interest to the redemption date (subject to the right of holders of record on
the relevant record date to receive interest due on an Interest Payment Date).
If redeemed during the 12-month period beginning May 1 of the years indicated,
such redemption price shall be as indicated:
Year Redemption Price
- ----------- ----------------------------
1999 103.5%
2000 103.0%
2001 102.5%
2002 102.0%
2003 101.5%
2004 101.0%
2005 100.5%
and at May 1, 2006, 100%. On or after the redemption date, interest will
cease to accrue on the Notes, or portion thereof, called for redemption.
<PAGE>
Mandatory Redemption
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes. Repurchase at the Option of Holders Upon the
occurrence of a Designated Event, each holder of Notes shall have the right to
require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such holder's Notes pursuant to the offer
described below (the "Designated Event Offer") at a purchase price equal to 101%
of the principal amount thereof, together with accrued and unpaid interest
thereon to the Designated Event Payment Date (the "Designated Event Payment").
Within 30 days following any Designated Event, the Company shall mail a notice
to each holder stating: (1) that the Designated Event Offer is being made
pursuant to the covenant described in this paragraph and that all Notes tendered
will be accepted for payment; (2) the purchase price and the purchase date,
which shall be no earlier than 30 days nor later than 40 days from the date such
notice is mailed (the "Designated Event Payment Date"); (3) that any Notes not
tendered will continue to accrue interest; (4) that, unless the Company defaults
in the payment of the Designated Event Payment, all Notes accepted for payment
pursuant to the Designated Event Offer shall cease to accrue interest after the
Designated Event Payment Date; (5) that holders electing to have any Notes
purchased pursuant to a Designated Event Offer will be required to surrender the
Notes, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third Business Day preceding
the Designated Event Payment Date; (6) that holders will be entitled to withdraw
their election if the Paying Agent receives, not later than the close of
business on the second Business Day preceding the Designated Event Payment Date,
a telegram, telex, facsimile transmission or letter setting forth the name of
the holder, the principal amount of Notes delivered for purchase, and a
statement that such holder is withdrawing his election to have such Notes
purchased; and (7) that holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof.
The Company will comply with the requirements of Rules 13e-4 and 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Notes in connection with a Designated Event.
On the Designated Event Payment Date, the Company will, to the extent
lawful, (1) accept for payment Notes or portions thereof duly tendered pursuant
to the Designated Event Offer, (2) deposit with the Paying Agent an amount equal
to the Designated Event Payment in respect of all Notes or portions thereof so
tendered and (3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate identifying the Notes or
portions thereof tendered to the Company. The Paying Agent shall promptly mail
to each holder of Notes so accepted payment in an amount equal to the purchase
price for such Notes, and the Trustee shall promptly authenticate and mail to
each holder a new certificate representing a Note equal in principal amount to
any unpurchased portion of the Notes surrendered, if any; provided, that each
such new certificate representing a Note shall be in a principal amount of
$1,000 or an integral multiple thereof. The Company will publicly announce the
results of the Designated Event Offer on or as soon as practicable after the
Designated Event Payment Date. Except as described above with respect to a
Designated Event, the Indenture does not contain any other provisions that
permit the holders of the Notes to require that the Company repurchase or redeem
the Notes in the event of a takeover, recapitalization or similar restructuring.
The Designated Event purchase feature of the Notes may in certain circumstances
make more difficult or discourage a takeover of the Company, and, thus, the
removal of incumbent management. The Designated Event purchase feature, however,
is not the result of management's knowledge of any specific effort to accumulate
the Company's stock or to obtain control of the Company by means of a merger,
tender offer, solicitation or otherwise, or part of a plan by management to
adopt a series of anti-takeover provisions. Instead, the Designated Event
purchase feature is a result of negotiations between the Company and the Initial
Purchasers. Management has no current intention to engage in a transaction
involving a Designated Event, although it is possible that the Company could
decide to do so in the future. Subject to the limitations on mergers,
consolidations and sales of assets described herein, the Company could, in the
future, enter into certain transactions, including acquisitions, refinancings or
other recapitalizations, that would not constitute a Designated Event under the
Indenture, but that could increase the amount of Indebtedness (including Senior
Indebtedness) outstanding at such time or otherwise affect the Company's capital
structure or credit ratings. The payment of the Designated Event Payment is
subordinated to the prior payment of Senior Indebtedness as described under
"--Subordination of Notes" below.
The Company's ability to repurchase Notes upon the occurrence of a
Designated Event is subject to limitations. If a Designated Event were to occur,
there can be no assurance that the Company would have sufficient financial
resources, or would be able to arrange financing, to pay the repurchase price
for all Notes tendered by holders thereof. In addition, the terms of certain of
the Company's existing debt agreements and lease facilities prohibit the Company
from purchasing any Notes under certain circumstances and also identify certain
events that would constitute a Change in Control, as well as certain other
events with respect to the Company or certain of its subsidiaries, which would
constitute an event of default under such debt agreements and lease agreements.
ANY future credit agreements or other agreements relating to Indebtedness of the
Company (including Senior Indebtedness) may contain similar prohibitions or
restrictions on the Company's ability to effect a Designated Event Payment. In
the event a Designated Event occurs at a time when such prohibitions or
restrictions are in effect, the Company could seek the consent of its lenders to
the purchase of Notes or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will be effectively prohibited from purchasing Notes. In
such case, the Company's failure to purchase tendered Notes would constitute an
Event of Default under the Indenture whether or not such repurchase is permitted
by the subordination provisions of the Indenture. ANY such default may, in turn,
cause a default under Senior Indebtedness of the Company. Moreover, the
occurrence of a Change in Control may cause an event of default under Senior
Indebtedness of the Company. As a result, in each case, any repurchase of the
Notes would, absent a waiver, be prohibited under the subordination provisions
of the Indenture until the Senior Indebtedness is paid in full.
See"--Subordination of Notes" below and "Risk Factors--Subordination." A
"Designated Event" will be deemed to have occurred upon a Change of Control or a
Termination of Trading. A "Change of Control" will be deemed to have occurred
when: (I) any "person" or "group" (as such terms are used in Section 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act) of shares representing more than
50% of the combined voting power of the then outstanding securities entitled to
vote generally in elections of directors of the Company ("Voting Stock"), (ii)
the Company consolidates with or merges into any other corporation, or any other
corporation merges into the Company, and, in the case of any such transaction,
the outstanding Common Stock of the Company is reclassified into or exchanged
for any other property or security, unless the stockholders of the Company
immediately before such transaction own, directly or indirectly immediately
following such transaction, at least a majority of the combined voting power of
the outstanding voting securities of the corporation resulting from such
transaction in substantially the same proportion as their ownership of the
Voting Stock immediately before such transaction, (iii) the Company conveys,
transfers or leases all or substantially all of its assets (other than to one or
more wholly-owned subsidiaries of the Company) or (iv) any time the Continuing
Directors do not constitute a majority of the Board of Directors of the Company
(or, if applicable, a successor corporation to the Company); provided, that a
Change of Control shall not be deemed to have occurred if at least 90% of the
consideration (excluding cash payments for fractional shares) in the transaction
or transactions constituting the Change of Control consists of shares of common
stock that are, or upon issuance will be, traded on a United States national
securities exchange or approved for trading on an established automated
over-the-counter trading market in the United States and as a result of such
transaction or transactions the Notes become convertible solely into such common
stock. The definition of Change of Control includes a phrase relating to the
lease, transfer or conveyance of "all or substantially all" of the assets of the
Company. Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of Notes to require
the Company to repurchase such Notes as a result of a lease, transfer or
conveyance of less than all of the assets of the Company to another person or
group may be uncertain. "Continuing Directors" means, as of any date of
determination, any member of the Board of Directors of the Company who (I) was a
member of such Board of Directors on the date of the Indenture or (ii) was
nominated for election or elected to such Board of Directors with the approval
of a majority of the Continuing Directors who were members of such Board at the
time of such nomination or election. A "Termination of Trading" will be deemed
to have occurred if the Common Stock (or other common stock into which the Notes
are then convertible) is neither listed for trading on a United States national
securities exchange nor approved for trading on an established automated
over-the-counter trading market in the United States. Selection and Notice If
less than all of the Notes are to be redeemed at any time, selection of Notes
for redemption will be made by the Trustee in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate, provided that no
Notes of $1,000 or less shall be redeemed in part. Notice of redemption shall be
mailed by first class mail at least 30 but not more than 60 days before the
redemption date to each holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
ceases to accrue on Notes or portions thereof called for redemption.
Registration Rights In connection with the original offering, the Company
entered into the Registration Agreement. Pursuant to the Registration Agreement,
the Company agreed for the benefit of the holders of the Notes or Common Stock
issued upon conversion thereof that are, in either case, Registrable Securities,
that (I) it would, at its cost, within 60 days after the closing of the sale of
the Notes (the "Closing"), file a shelf registration statement (the "Shelf
Registration Statement") with the Commission with respect to resales of the
Notes and the Common Stock issuable upon conversion thereof, (ii) the Company
would cause such Shelf Registration Statement to be declared effective under the
Securities Act as soon as practicable but in any event, within 90 days after the
Closing and (iii) the Company would keep such Shelf Registration Statement
continuously effective under the Securities Act until the earlier of (a) the
third anniversary of the date of the Closing, (b) the date on which the Notes or
the Common Stock issuable upon conversion thereof may be sold by non-affiliates
of the Company pursuant to paragraph (k) of Rule 144 (or any successor
provision) promulgated by the Commission under the Securities Act and (C) the
date as of which all the Notes or the Common Stock issuable upon conversion
thereof have been sold pursuant to such Shelf Registration Statement (the "Shelf
Registration Period"). The Company shall have the right, however, to defer the
use of the prospectus which will be a part of the Shelf Registration Statement,
as more fully described below. The Company will provide or cause to be provided
to each holder of the Notes, or the Common Stock issuable upon conversion of the
Notes, copies of the prospectus, which will be a part of such Shelf Registration
Statement, notify or cause to be notified to each such holder when such Shelf
Registration Statement for the Notes or the Common Stock issuable upon
conversion of the Notes has become effective and take certain other actions as
are required to permit unrestricted resales of the Notes or the Common Stock
issuable upon conversion of the Notes. A holder of Notes or the Common Stock
issuable upon conversion of the Notes that sells such securities pursuant to a
Shelf Registration Statement will be required to be named as a selling security
holder in the related prospectus and to deliver a prospectus to purchasers, will
be subject to certain of the civil liability provisions under the Securities Act
in connection with such sales and will be bound by the provisions of the
Registration Agreement that are applicable to such holder (including certain
indemnification and contribution rights or obligations). The Company currently
intends to distribute a questionnaire to each beneficial holder of Notes as of a
specified date to obtain certain information regarding such selling security
holders for inclusion in the prospectus. At least three business days prior to
any intended resale of the Notes or the Common Stock issuable upon conversion
thereof, the holder thereof must notify the Company of such intention and
provide such information with respect to such holder and the specifics of the
intended resale as may be required to amend the Shelf Registration Statement or
supplement the related prospectus (a holder giving such notice, a "Notice
Holder"). Within two business days after the foregoing notice is provided by a
Notice Holder, the Company will either (I) notify such Notice Holder that
resales may proceed or file any amendment to the Shelf Registration Statement or
supplement to the related prospectus needed to ensure that those documents,
among other things, comply with the Securities Act, cause any such amendment to
be declared effective and notify such Notice Holder thereof or (ii) notify such
Notice Holder of the Company's election to defer resales until further notice (a
"Deferral Period") under certain circumstances relating to issuance of a stop
order by the Commission, suspension of qualification under state law, accuracy
of the prospectus which is a part of the Shelf Registration Statement, pending
corporate developments, public filings with the Commission and similar events.
If the Company elects the option described in clause (I) of the preceding
sentence, such Notice Holder may resell Notes or the Common Stock issuable upon
conversion thereof pursuant to the Shelf Registration Statement for a period of
45 days (with respect to such Notice Holder, a "Selling Period") from the date
notice of such election is given and, if the Company elects the option described
in clause (ii) of the preceding sentence, such Notice Holder may resell such
securities for a Selling Period that commences at the end of the Deferral
Period. The Company may also defer until further notice a Notice Holder's
existing Selling Period upon the occurrence of the events described in clause
(ii) of the second preceding sentence; provided that upon receipt of such
further notice, such Selling Period shall be extended by the number of days
elapsed prior to deferral. The Company may not defer Selling Periods more than
one time in any three month period or three times in any twelve month period and
no deferral shall exceed 30 days. The Company will pay all expenses of the Shelf
Registration Statement, provide to each registered holder of Notes copies of
such prospectus, notify each such registered holder when the Shelf Registration
Statement has become effective and take certain other actions as are required to
permit, subject to the foregoing, unrestricted resales of the Notes and the
Common Stock issuable upon conversion thereof.
In the event the Company fails to file the Shelf Registration Statement
within 60 days after Closing, the Shelf Registration Statement is not declared
effective under the Securities Act within 90 days after the Closing, a stop
order is issued by the Commission prior to the end of the Shelf Registration
Period or Selling Periods have been deferred more frequently or for longer
periods than are described above, the Company has agreed to pay liquidated
damages to all Notice Holders of Notes and of Common Stock issuable upon
conversion thereof until such event is cured. Further, if such event continues
for a period in excess of 30 days, the Company has agreed to pay liquidated
damages to all holders of Notes and Common Stock issued upon conversion thereof
which are, in either case, Registrable Securities, without regard to whether
such holder is a Notice Holder. Liquidated Damages shall be calculated, with
respect to Notes held by a holder, at a rate of one-half of one percent (50
basis points) per annum of the aggregate principal amount of such Notes and,
with respect to shares of Common Stock held by a holder and issued upon
conversion of Notes, the same percentage of the aggregate principal mount of
Notes that were converted into such shares. "Registrable Securities" means the
Securities and shares of Common Stock issued upon conversion thereof, excluding
any such securities that, and any such securities the predecessors of which,
were previously sold pursuant to a registration statement or Rule 144 under
the Securities Act. Conversion The holder of any Note will have the right,
exercisable at any time after 90 days following the date of original issuance
thereof and prior to the close of business on the Business Day immediately
preceding the maturity date of the Notes, to convert the principal amount
thereof (or any portion thereof that is an integral multiple of $1,000) into
shares of Common Stock at the conversion price set forth on the cover page of
this Prospectus, subject to adjustment as described below (the "Conversion
Price"), except that if a Note is called for redemption, the conversion right
will terminate at the close of business on the Business Day immediately
preceding the date fixed for redemption. Except as described below, no
adjustment will be made on conversion of any Notes for interest accrued thereon
or for dividends on any Common Stock issued. If Notes not called for redemption
are converted after a record date for the payment of interest and prior to the
next succeeding Interest Payment Date, such Notes must be accompanied by funds
equal to the interest payable on such succeeding Interest Payment Date on the
principal amount so converted. No fractional shares will be issued upon
conversion but a cash adjustment will be made for any fractional interest. The
Conversion Price is subject to adjustment upon the occurrence of certain events,
including: (I) the issuance of shares of Common Stock as a dividend or
distribution on the Common Stock; (ii) the subdivision or combination of the
outstanding Common Stock, (iii) the issuance to substantially all holders of
Common Stock of rights or warrants to subscribe for or purchase Common Stock or
securities convertible into Common Stock) at a price per share less than the
then Current Market Price per share, as defined; (iv) the distribution of shares
of capital stock of the Company (other than Common Stock), evidences of
indebtedness or other assets (excluding dividends in cash, except as described
in clause (v) below) to all holders of Common Stock; (v) the distribution, by
dividend or otherwise, of cash to all holders of Common Stock in an aggregate
amount that, together with the aggregate of any other distributions of cash that
did not trigger a Conversion Price adjustment to all holders of its Common Stock
within the 12 months preceding the date fixed for determining the stockholders
entitled to such distribution and all Excess Payments in respect of each tender
offer or other negotiated transaction by the Company or any of its Subsidiaries
for Common Stock concluded within the preceding 12 months not triggering a
Conversion Price adjustment, exceeds 15% of the product of the Current Market
Price per share (determined as set forth below) on the date fixed for the
determination of stockholders entitled to receive such distribution times the
number of shares of Common Stock outstanding on such date; (vi) payment of an
Excess Payment in respect of a tender offer or other negotiated transaction by
the Company or any of its Subsidiaries for Common Stock, if the aggregate amount
of such Excess Payment, together with the aggregate amount of cash distributions
made within the preceding 12 months not triggering a Conversion Price adjustment
and all Excess Payments in respect of each tender offer or other negotiated
transaction by the Company or any of its Subsidiaries for Common Stock concluded
within the preceding 12 months not triggering a Conversion Price adjustment,
exceeds 15% of the product of the Current Market Price per share (determined as
set forth below) on the expiration of such tender offer or the date of payment
of such negotiated transaction consideration times the number of shares of
Common Stock outstanding on such date; and (vii) the distribution to
substantially all holders of Common Stock of rights or warrants to subscribe for
securities (other than those securities referred to in clause (iii) above). In
the event of a distribution to substantially all holders of Common Stock of
rights to subscribe for additional shares of the Company's capital stock (other
than those securities referred to in clause (iii) above), the Company may,
instead of making any adjustment in the Conversion Price, make proper provision
so that each holder of a Note who converts such Note after the record date for
such distribution and prior to the expiration or redemption of such rights shall
be entitled to receive upon such conversion, in addition to shares of Common
Stock, an appropriate number of such rights. No adjustment of the Conversion
Price will be made until cumulative adjustments amount to one percent or more of
the Conversion Price as last adjusted. If the Company reclassifies or changes
its outstanding Common Stock, or consolidates with or merges into any person or
transfers or leases all or substantially all its assets, or is a party to a
merger that reclassifies or changes its outstanding Common Stock, the Notes will
become convertible into the kind and amount of securities, cash or other assets
which the holders of the Notes would have owned immediately after the
transaction if the holders had converted the Notes immediately before the
effective date of the transaction. The Indenture also provides that if rights,
warrants or options expire unexercised the Conversion Price shall be readjusted
to take into account the actual number of such warrants, rights or options which
were exercised. In the Indenture, the "Current Market Price" per share of Common
Stock on any date shall be deemed to be the average of the Daily Market Prices
for the shorter of (I) 30 consecutive Business Days ending on the last full
trading day on the exchange or market referred to in determining such Daily
Market Prices prior to the time of determination (as defined in the Indenture)
or (ii) the period commencing on the date next succeeding the first public
announcement of the issuance of such rights or warrants or such distribution
through such last full trading day prior to the time of determination. "Excess
Payment" means the excess of (A) the aggregate of the cash and fair market value
of other consideration paid by the Company or any of its Subsidiaries with
respect to the shares acquired in the tender offer or other negotiated
transaction over (B) the Daily Market Price on the Trading Day immediately
following the completion of the tender offer or other negotiated transaction
multiplied by the number of acquired shares. The Company from time to time may
to the extent permitted by law reduce the Conversion Price by any amount for any
period of at least 20 days (each such reduction, an "Induced Conversion
Adjustment"), in which case the Company shall give at least 15days' notice of
such reduction, if the Board of Directors has made a determination that such
reduction would be in the best interests of the Company, which determination
shall be conclusive. The Company may, at its option, make such reductions in the
Conversion Price, in addition to those set forth above, as the Board of
Directors deems advisable to avoid or diminish any income tax to holders of
Common Stock resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax purposes. See
"Certain Federal Income Tax Considerations". Subordination of Notes The Notes
will be subordinate in right of payment to all existing and future Senior
Indebtedness. The Indenture does not restrict the amount of Senior Indebtedness
or other Indebtedness of the Company or any Subsidiary of the Company. In
addition, the Notes will be structurally subordinated to all indebtedness and
other liabilities of the Company's subsidiaries. As of March 24, 1996, the
Company had approximately $217 million of indebtedness that would have
constituted Senior Indebtedness. The payment of the principal of, interest on or
any other amounts due on the Notes will be subordinated in right of payment to
the prior payment in full of all Senior Indebtedness of the Company. No payment
on account of principal of, redemption of, interest on or any other amounts due
on the Notes, including, without limitation, any payments on the Designated
Event Offer, and no redemption, purchase or other acquisition of the Notes may
be made unless (I) full payment of amounts then due on all Senior Indebtedness
have been made or duly provided for pursuant to the terms of the instrument
governing such Senior Indebtedness, and (ii) at the time for, or immediately
after giving effect to, any such payment, redemption, purchase or other
acquisition, there shall not exist under any Senior Indebtedness or any
agreement pursuant to which any Senior Indebtedness has been issued, any default
which shall not have been cured or waived and which shall have resulted in the
full amount of such Senior Indebtedness being declared due and payable. In
addition, the Indenture will provide that if any of the holders of any issue of
Designated Senior Indebtedness notify (the "Payment Blockage Notice") the
Company and the Trustee that a default has occurred giving the holders of such
Designated Senior Indebtedness the right to accelerate the maturity thereof, no
payment on account of principal, redemption, interest or any other amounts due
on the Notes and no purchase, redemption or other acquisition of the Notes will
be made for the period (the "Payment Blockage Period") commencing on the date
the Payment Blockage Notice is received and ending on the earlier of (A) the
date on which such event of default shall have been cured or waived or (B) 180
days from the date the Payment Blockage Notice is received. Notwithstanding the
foregoing (but subject to the provisions contained in the first sentence of this
Section), unless the holders of such Designated Senior Indebtedness or the
Representative of such holders shall have accelerated the maturity of such
Designated Senior Indebtedness, the Company may resume payments on the
Securities after the end of such Payment Blockage Period. Not more than one
Payment Blockage Notice may be given in any consecutive 365-day period,
irrespective of the number of defaults with respect to Senior Indebtedness
during such period. Upon any distribution of its assets in connection with any
dissolution, winding-up, liquidation or reorganization of the Company or
acceleration of the principal amount due on the Notes because of an Event of
Default, all Senior Indebtedness must be paid in full before the holders of the
Notes are entitled to any payments whatsoever. If payment of the Notes is
accelerated because of an Event of Default, the Company or the Trustee shall
promptly notify the holders of Senior Indebtedness or the trustee(s) for such
Senior Indebtedness of the acceleration. The Company may not pay the Notes until
five business days after such holders or trustee(s) of Senior Indebtedness
receive notice of such acceleration and, thereafter, may pay the Notes only if
the subordination provisions of the Indenture otherwise permit Payment at that
time. As a result of these subordination provisions, in the event of the
Company's insolvency, holders of the Notes may recover ratably less than general
creditors of the Company. Merger, Consolidation or Sale of Assets The Indenture
will provide that the Company may not consolidate or merge with or into any
Person (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets unless (I) (a) the Company is the surviving or
continuing corporation or (b) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the Person to which such
sale, assignment, transfer, lease, conveyance or other disposition will have
been made assumes all the Obligations of the Company, pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, under the Notes and
the Indenture; (iii) such sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the Company's properties or assets
shall be as an entirety or virtually as an entirety to one Person and such
Person shall have assumed all the obligations of the Company, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, under
the Notes and the Indenture; (iv) immediately after such transaction no Default
or Event of Default exists; and (v) the Company or such Person shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such transaction and the supplemental indenture comply with
the Indenture and that all conditions precedent in the Indenture relating to
such transaction have been satisfied. Reports Whether or not required by the
rules and regulations of the Commission, so long as any Notes are outstanding,
the Company will file with the Commission and furnish to the holders of Notes
all quarterly and annual financial information required to be contained in a
filing with the Commission on Forms 10-Q and 10-K, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual consolidated financial statements only, a report
thereon by the Company's independent auditors. Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default: (I) default for 30 days in the payment when due of interest on the
Notes; (ii) default in payment when due of principal on the Notes; (iii) failure
by the Company to comply with the provisions described under "Designated Event";
(iv) failure by the Company for 60 days after the receipt of written notice to
comply with certain other covenants and agreements contained in the Indenture or
the Notes; (v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Material
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Material Subsidiaries), whether such Indebtedness or guarantee now exists or is
created after the date on which the Notes are first authenticated and issued,
which default (a) is caused by a failure to pay when due principal or interest
on such Indebtedness within the grace period provided in such Indebtedness
(which failure continues beyond any applicable grace period) (a "Payment
Default") or (b) results in the acceleration of such Indebtedness prior to its
express maturity without such acceleration being rescinded or annulled and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates $50
million or more; (vi) failure by the Company or any Material Subsidiary of the
Company to pay final non-appealable judgments (other than any judgment as to
which a reputable insurance company has accepted full liability) aggregating in
excess of $50 million, which judgments are not stayed within 60 days after their
entry; and (vii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Material Subsidiaries. If any Event of Default occurs and
is continuing, the Trustee or the holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, with respect to the
Company or any Material Subsidiary, all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest. By notice to the Trustee, the holders of a majority in
aggregate principal amount of the Notes then outstanding may, on behalf of the
holders of all of the Notes, waive any existing Default or Event of Default and
its consequences under the Indenture except a continuing Default or Event of
Default in the payment of the Designated Event Payment or interest on, or the
principal of, the Notes. The Company is required to deliver to the Trustee
annually a statement regarding compliance with the Indenture, and the Company is
required, upon becoming aware of any Default or Event of Default, to deliver to
the Trustee a statement specifying such Default or Event of Default. Book-Entry;
Delivery and Form The certificates representing the Notes will be issued in
fully registered form, without coupons. Except as described in the next
paragraph, the Notes will be deposited with, or on behalf of, The Depository
Trust Company, New York, New York ("D.C."), and registered in the name of Cede &
Co., as DTC's nominee in the form of a global Note certificate (the "Global
Certificate") or will remain in the custody of the Trustee pursuant to a FAST
Balance Certificate Agreement between DTC and the Trustee. The Global
Certificates Upon the issuance of the Global Certificate, DTC or its custodian
will credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Certificate to the
accounts of persons who have accounts with such depositary. Such accounts
initially will be designated by or on behalf of the Initial Purchasers.
Ownership of beneficial interests in a Global Certificate will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Certificate will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). CABBIES may hold their interests
in a Global Certificate directly through DTC if they are participants in such
system, or indirectly through organizations which are participants in such
system. So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Notes represented by such Global Certificate for
all purposes under the Indenture and the Notes. No beneficial owner of an
interest in a Global Certificate will be able to transfer the interest except in
accordance with DTC's applicable procedures, in addition to those provided for
under the Indenture. Payments of the principal of, and interest on, a Global
Certificate will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither the Company, the Trustee nor any Paying Agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in a Global
Certificate or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests. The Company expects that DTC or its
nominee, upon receipt of any payment of principal or interest in respect of a
Global Certificate, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Certificate as shown on the records of DTC or its nominee. The
Company also expects that payments by participants to owners of beneficial
interests in such Global Certificate held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants. Transfers between participants in DTC will be effected in the
ordinary way in accordance with DTC rules. If a holder requires physical
delivery of a certificated note for any reason, including to sell Notes to
persons in jurisdictions which require such delivery of such Notes or to pledge
such Notes, such holder must transfer its interest in a Global Certificate in
accordance with the normal procedures of DTC and the procedures set forth in the
Indenture. Once an interest in a Global Certificate is delivered as a
certificated note to an Institutional Accredited Investor, such certificated
note may not be exchanged for an interest in a Global Certificate. The Company
expects that DTC will take any action permitted to be taken by a holder of Notes
(including the presentation of Notes for exchange as described below) only at
the direction of one or more participants to whose account the DTC interests in
a Global Certificate is credited and only in respect of such portion of the
aggregate principal amount of the Notes as to which such participant or
participants has or have given such direction. However, if there is an Event of
Default (as defined below) under the Notes, DTC will exchange a Global
Certificate for certificated notes, which it will distribute to its participants
and which will be legended as set forth under "Notice to Investors." DTC has
advised the Company as follows: DTC is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the Uniform Commercial Code and a
"Clearing Agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other organizations.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants"). Although the Company expects that DTC will agree to the
foregoing procedures in order to facilitate transfers of interests in a Global
Certificate among participants of DTC, DTC is under no obligation to perform or
continue to perform such procedures, and such procedures may be discontinued at
any time. Neither the Company nor the Trustee will have any responsibility for
the performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations. If DTC is at any time unwilling or unable to continue as a
depositary for a Global Certificate and a successor depositary is not appointed
by the Company within 90 days, the Company will issue certificated notes in
exchange for a Global Certificate. Transfer and Exchange A holder may transfer
or exchange Notes in accordance with the Indenture. The Registrar and the
Trustee may require a holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a holder to pay
any taxes and fees required by law or permitted by the Indenture. The Company is
not required to exchange or register the transfer of any Note selected for
redemption. Also, the Company is not required to exchange or register the
transfer of any Note for a period of 15 days before a selection of Notes to
be redeemed. The registered holder of a Note will be treated as the owner of it
for all purposes. Amendment, Supplement and Waiver Except as provided in the
next succeeding paragraph, the Indenture or the Notes may be amended or
supplemented with the consent of the holders of at least a majority in principal
amount of the then outstanding Notes (including consents obtained in connection
with a tender offer or exchange offer for Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes). Without the consent of each holder affected, an
amendment or waiver may not (with respect to any Notes held by a nonconsenting
holder of Notes) (I) reduce the amount of Notes whose holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes, (iii) reduce the rate of or change the time for payment
of interest on any Note, (iv) waive a default in the payment of principal of or
interest on any Notes (except a rescission of acceleration of the Notes by the
holders of at least a majority in aggregate principal amount of the Notes and a
waiver of the payment default that resulted from such acceleration), (v) make
any Note payable in money other than that stated in the Notes, (vi) make any
change in the provisions of the Indenture relating to waivers of past Defaults
or the rights of holders of Notes to receive payments of principal of or
interest on the Notes, (vii) waive a redemption payment with respect to any
Note, (viii) impair the right to convert the Notes into Common Stock, (ix)
modify the conversion or subordination provisions of the Indenture in a manner
adverse to the holders of the Notes or (x) make any change in the foregoing
amendment and waiver provisions. Notwithstanding the foregoing, without the
consent of any holder of Notes, the Company and the Trustee may amend or
supplement the Indenture or the Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's obligations
to holders of the Notes in the case of a merger or consolidation, to make any
change that would provide any additional rights or benefits to the holders of
the Notes or that does not adversely affect the legal rights under the Indenture
of any such holder, or to comply with requirements of the Commission in order to
qualify, or maintain the qualification of, the Indenture under the Trust
Indenture Act. Concerning the Trustee The Indenture contains certain limitations
on the rights of the Trustee, should it become a creditor of the Company, to
obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. The Trustee will
be permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign. The holders of a majority
in principal amount of the then outstanding Notes will have the right to direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the Trustee, subject to certain exceptions. The Indenture
provides that, in case an Event of Default shall occur (which shall not be
cured), the Trustee will be required, in the exercise of its power, to use the
degree of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any holder of Notes,
unless such holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense. Additional
Information Anyone who receives this Prospectus may obtain a copy of the
Indenture without charge by writing to SCI Systems, Inc., Investor Relations,
2000 Ringwood Avenue, San Jose, California 95131; or Ronald G. Sibold,
Treasurer, SCI Systems, Inc., c/o SCI Systems (Alabama), Inc., P.O. Box 1000,
Huntsville, Alabama 35807. Certain Definitions Set forth below are certain
defined terms used in the Indenture. Reference is made to the Indenture for a
full disclosure of all such terms, as well as any other capitalized terms used
herein for which no definition is provided. "Capital Stock" means any and all
shares, interests, participations, rights or other equivalents (however
designated) of equity interests in any entity, including, without limitation,
corporate stock and partnership interests. "Default" means any event that is or,
with the passage of time or the giving of notice or both, would be an Event of
Default. "Designated Senior Indebtedness" means (I) any Senior Indebtedness
which, as of the date of the Indenture, had an aggregate principal amount
outstanding of at least $15 million and (ii) any Senior Indebtedness which, at
the date of determination, had an aggregate principal amount outstanding of, or
commitments to lend up to, at least $15 million and was specifically designated
by the Company in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture.
"GAAP" means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness. "Indebtedness" means, with respect to any person, all obligations,
whether or not contingent, of such person (I) (a) for borrowed money (including,
but not limited to, any indebtedness secured by a security interest, mortgage or
other lien on the assets of such person which is (1) given to secure all or part
of the purchase price of property subject thereto, whether given to the vendor
of such property or to another, or (2) existing on property at the time of
acquisition thereof), (b) evidenced by a note, debenture, bond or other written
instrument, (C) under a lease required to be capitalized on the balance sheet of
the lessee under GAAP or under any lease or related document (including a
purchase agreement) which provides that such person is contractually obligated
to purchase or to cause a third party to purchase such leased property, (d) in
respect of letters of credit, bank guarantees or bankers' acceptances (including
reimbursement obligations with respect to any of the foregoing), (e) with
respect to Indebtedness secured by a mortgage, pledge, lien, encumbrance, charge
or adverse claim affecting title or resulting in an encumbrance to which the
property or assets of such person are subject, whether or not the obligation
secured thereby shall have been assumed or guaranteed by or shall otherwise be
such person's legal liability, (f) in respect of the balance of deferred and
unpaid purchase price of any property or assets and (g) under interest rate or
currency swap agreements, cap, floor and collar agreements, spot and forward
contracts and similar agreements and arrangements; (ii) with respect to any
obligation of others of the type described in the preceding clause (I) or under
clause (iii) below assumed by or guaranteed in any manner by such person or in
effect guaranteed by such person through an agreement to purchase (including,
without limitation, "take or pay" and similar arrangements), contingent or
otherwise (and the obligations of such person under any such assumptions,
guarantees or other such arrangements); and (iii) any and all deferrals,
renewals, extensions, refinancings and refundings of, or amendments,
modifications or supplements to, any of the foregoing.
"Material Subsidiary" means any Subsidiary of the Company which at the date
of determination is a "significant subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act and the Exchange Act (as such Regulation
is in effect on the date hereof). "Obligations" means any principal, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness. "Person" means any
individual, corporation, partnership, joint venture, association, joint stock
company, trust, unincorporated organization, limited liability company or
government or any agency or political subdivision thereof. "Representative"
means the trustee, agent or representative (if any) for an issue of Senior
Indebtedness. "Senior Indebtedness" means the principal of, interest on and
other amounts due on Indebtedness of the Company, whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed or guaranteed by
the Company; unless, in the instrument creating or evidencing such Indebtedness
or pursuant to which such Indebtedness is outstanding, it is expressly provided
that such Indebtedness is not senior in right of payment to the Notes. Senior
Indebtedness includes, with respect to the obligations described above, interest
accruing, pursuant to the terms of such Senior Indebtedness, on or after the
filing of any petition in bankruptcy or for reorganization relating to the
Company, whether or not post-filing interest is allowed in such proceeding, at
the rate specified in the instrument governing the relevant obligation.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
shall not include: (a) Indebtedness of or amounts owed by the Company for
compensation to employees, or for goods, services or materials purchased in the
ordinary course of business; (b) Indebtedness of the Company to a Subsidiary of
the Company other than such Indebtedness that would be subject to a prior claim
by the lenders under the Company's existing credit facilities; or (C) any
liability for Federal, state, local or other taxes owed or owing by the Company.
"Subsidiary" of a person means any corporation, association or other business
entity of which more than 50% of the total voting power of shares of Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that person or one or more of the other
Subsidiaries of that person or a combination thereof.
DESCRIPTION OF CAPITAL STOCK
At March 31, 1996, the Company's authorized capital stock consisted of
100,000,000 shares of Common Stock, $.10 par value, and 500,000 shares of
Preferred Stock, no par value. At March 31, 1996, 29,539,945 shares of Common
Stock were issued with no shares of Preferred Stock outstanding.
Holders of the Common Stock are entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors in its discretion
from funds legally available therefor, subject to certain financial covenants
contained in the Company's loan agreements. See "Price Range of Common Stock and
Dividend Policy." Holders of the Common Stock are entitled to one vote per share
on all matters voted upon by stockholders. Stockholders do not have cumulative
voting rights which means that the holders of a majority of the shares voting
for the election of directors can elect all the directors then standing for
election, if they choose to do so. On liquidation of the Company, the holders of
the Common Stock are entitled to share pro rata in any distribution of any
assets of the Company remaining after satisfaction of creditors and distribution
to the holders of any outstanding Preferred Stock of the liquidation preferences
of such stock and any unpaid dividends thereon. The holders of the Common Stock
have no preemptive or other subscription or conversion privileges and there are
no redemption provisions with respect to such shares. The shares of Common Stock
outstanding at the date of this Prospectus are, and the shares of Common Stock
to be issued upon the conversion of the Debentures will be, fully paid and
non-assessable.
The Preferred Stock has voting rights equal to the Common Stock of the
Company and (unless expressly required otherwise by law) votes with the Common
Stock as a single class, may be issued in one or more series, and has such
rights and preferences and is subject to such terms and conditions as may be
fixed by the Board of Directors prior to the issuance of any series.
The Certificate of Incorporation of the Company requires the affirmative
vote of the holders of 70% of the voting stock to approve certain mergers,
consolidations, reclassifications, dispositions of assets or liquidations,
involving or proposed by certain "Interested Stockholders," unless certain price
and procedural requirements are met or unless the transaction is approved by
two-thirds of the disinterested directors. Generally, "Interested Stockholders"
include any person who beneficially owns 20% or more of the Company's voting
stock and, in certain cases, any person who beneficially owned 20% or more of
the Company's voting stock at any time during the two years prior to the date in
question or an assignee or successor of such a person. In addition, the
Certificate of Incorporation provides: (I) for classification of the Board of
Directors into three separate classes, each elected for a term of three years;
(ii) that special meetings of the stockholders may be called only by two-thirds
of the directors, the Chairman of the Board, or holders of 70% of the voting
stock; and (iii) that action by the stockholders of the Company in lieu of a
meeting of the stockholders may be taken only with the written consent of
holders of 70% of the voting stock. Except for any amendment recommended by
two-thirds of the directors, these provisions of the Certificate of
Incorporation may be amended only by the affirmative vote of holders of 70% of
the voting stock of the Company. The overall effect of these provisions may be
to delay or prevent attempts by other corporations or groups to acquire control
of the Company without negotiation with the Board of Directors.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations relating to the purchase, ownership and disposition of the Notes
and the Common Stock into which Notes may be converted, but does not purport to
be a complete analysis of all the potential tax considerations relating thereto.
This summary is based on laws, regulations, rulings and decisions now in effect,
all of which are subject to change. This summary deals only with holders that
will hold Notes and Common Stock as capital assets and does not address tax
considerations applicable to investors that may be subject to special tax rules,
such as banks, tax-exempt organizations, insurance companies, dealers in
securities or currencies, persons that will hold the Notes or Common Stock as
part of a position in a "straddle" for tax purposes or holders of Notes that did
not acquire the Notes in the initial distribution thereof.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT WITH THEIR OWN
TAX ADVISORS REGARDING THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX
AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING
JURISDICTION, OR UNDER ANY APPLICABLE TAX TREATY.
<PAGE>
United States Holders
As used herein, the term "United States Holder" means a holder of a Note
that is a citizen or resident of the United States, or that is a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof or an estate or trust the
income of which is subject to United States federal income taxation regardless
of its source, and the term "United States" means the United States of America
(including the States and Districts of Columbia).1
Payment of Interest
Interest on a Note generally will be includible in the income of a United
States Holder as ordinary income at the time such interest is received or
accrued, in accordance with such Holder's method of accounting for United States
federal income tax purposes.
Sale, Exchange or Redemption of the Notes
Upon the sale, exchange or redemption of a Note, a United States Holder
generally will recognize capital gain or loss equal to the difference between
(I) the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption (except to the extent such amount
is attributable to accrued interest income, which is taxable as ordinary income)
and (ii) such Holder's adjusted basis in the Note. A United States Holder's
adjusted basis in a Note generally will equal the cost of the Note to such
holder. Such capital gain or loss will be long-term capital gain or loss if the
Note was held for more than one year at the time of sale, exchange or
redemption.
Conversion of the Notes
A United States Holder generally will not recognize any income, gain, or
loss upon conversion of a Note into Common Stock except with respect to cash
received in lieu of a fractional Share of Common Stock. Such Holder's basis in
the Common Stock received on conversion of a Note will be the same as such
Holder's adjusted basis in the Note at the time of conversion (reduced by any
basis allocable to a fractional share interest), and the holding period for the
Common Stock received on conversion will generally include the holding period of
the Note converted.
Cash received in lieu of a fractional share of Common Stock upon conversion
will be treated as a payment in exchange for the fractional share of Common
Stock. Accordingly, the receipt of cash in lieu of a fractional share of Common
Stock generally will result in capital gain or loss (measured by the difference
between the cash received for the fractional share and the United States
Holder's adjusted basis in the fractional share).
Adjustment of Conversion Price
The conversion price of the Notes is subject to adjustment in certain
circumstances. Under Section 305(C) of the United States Internal Revenue Code
of 1986 (the "Code"), adjustments that have the effect of increasing the
proportionate interest of holders of the Notes in the assets or earnings of the
Company (for example, an adjustment following a distribution of property by the
Company to its shareholders) may in some circumstances give rise to deemed
dividend income to United States Holders; similarly, a failure to adjust the
conversion price of the Notes to reflect a stock dividend or other event
increasing the proportionate interest of the holders of outstanding Company
Common Stock can in some circumstances give rise to deemed dividend income to
United States Holders of such Common Stock.
Dividends on the Common Stock
Dividends paid on the Common Stock generally will be includible in the
income of a United States Holder as ordinary income to the extent of the
Company's current or accumulated earnings and profits.
Sale or Other Disposition of Common Stock
United States Holders generally will be subject to taxation with respect to
any gain recognized on the sale, exchange, redemption or other disposition of
shares of Common Stock. Such gain will be capital gain, and will be long-term
capital gain if the shares of Common Stock were held for more than one year.
Information Reporting and Backup Withholding Tax
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Note, payments of dividends on
Common Stock, and payments of the proceeds of the sale of a Note or Common Stock
to certain non-corporate United States Holders, and a 31% backup withholding tax
may apply to such payments if the United States Holder (I) fails to furnish or
certify his correct taxpayer identification number to the payor in the manner
required, (ii) is notified by the Internal Revenue Service (the "IRS") that he
has failed to report payments of interest and dividends properly, or (iii) under
certain circumstances, fails to certify that he has not been notified by the IRS
that he is subject to backup withholding for failure to report interest and
dividend payments. ANY amounts withheld under the backup withholding rules from
a payment to a United States Holder will be allowed as a credit against such
holder's United States federal income tax liability and may entitle the holder
to a refund.
Non-United States Holders
Subject to the discussion of backup withholding below, payments of
principal and interest on the Notes to, or on behalf of, any beneficial owner of
a Note that is not a United States Holder (a "Non-U.S. Holder") will not be
subject to U.S. federal withholding tax; provided, in the case of interest, that
(I) such Non-U.S. Holder does not actually or constructively own 10 percent or
more of the total combined voting power of all classes of stock of the Company,
(ii) such Non-U.S. Holder is not a controlled foreign corporation for U.S. tax
purposes that is related to the Company through stock ownership and (iii) either
(A) the Non-U.S. Holder certifies, under penalties of perjury, that it is not a
United States Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and that holds the Note certifies, under penalties of perjury,
that such statement has been received from the Non-U.S. Holder by it or by
another financial institution and furnishes the payor with a copy thereof.
ANY capital gain realized on the sale, exchange, redemption or other
disposition of a Note or of shares of Common Stock (including the receipt of
cash in lieu of fractional shares upon conversion of a Note into shares of
Common Stock) by a Non-U.S. Holder will not be subject to United States federal
income or withholding taxes if (I) such gain is not effectively connected with a
U.S. trade or business of the holder and (ii) in the case of an individual, such
holder is not present in the United States for 183 days or more in the taxable
year of the sale, exchange, redemption, or other disposition or receipt.
Except as described in the previous paragraph above with respect to the
receipt of cash in lieu of fractional shares by certain holders upon conversion
of a Note, no United States federal income tax will be imposed upon the
conversion of a Note into shares of Common Stock.
Dividends paid (or deemed paid, as described under "United States
Holders--Adjustment of Conversion Price") on shares of Common Stock held by a
Non-U.S. Holder will be subject to withholding of United States federal income
tax at a 30 percent rate (or lower rate provided under any applicable tax
treaty, assuming the holder of the Common Stock satisfies any certification or
documentation requirements necessary to claim the benefits of such treaty),
unless the dividends are effectively connected with the conduct by the Non-U.S.
Holder of a trade or business in the United States, in which case such dividends
will be subject to United States federal income tax at regular rates and will be
exempt from the 30 percent withholding tax.
Payments made on a Note or shares of Common Stock and proceeds from the
sale of a Note or shares of Common Stock received by a Non-U.S. Holder will not
be subject to a backup withholding tax of 31% or to information reporting
requirements unless, in general, the holder fails to comply with certain
reporting procedures or otherwise fails to establish an exemption from such tax
or reporting requirements under applicable provisions of the Code.
<PAGE>
PLAN OF DISTRIBUTION
The Notes and Common Stock offered hereby may be sold from time to time to
purchasers directly by the Selling Holders. Alternatively, the Selling Holders
may from time to time offer the Notes and Common Stock to or through
underwriters, broker/dealers or agents, who may receive compensation in the form
of underwriting discounts, concessions or commissions from the Selling Holders
or the purchasers of Notes and Common Stock for whom they may act as agents. The
Selling Holders and any underwriters, broker/dealers or agents that participate
in the distribution of Notes and Common Stock may be deemed to be "underwriters"
within the meaning of the Securities Act and any profit on the sale of Notes and
Common Stock by them and any discounts, commissions, concessions or other
compensation received by any such underwriter, broker/dealer or agent may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Notes and Common Stock issuable upon conversion thereof may be sold
from time to time in one or more transactions at fixed prices, at prevailing
market prices at the time of sale, at varying prices determined at the time of
sale or at negotiated prices. The sale of the Notes and the Common Stock
issuable upon conversion thereof may be effected in transactions (which may
involve crosses or block transactions) (I) on any national securities exchange
or quotation service on which the Notes or the Common Stock may be listed or
quoted at the time of sale, (ii) in the over-the-counter market, (iii) in
transactions otherwise than on such exchanges or in the over-the-counter market
or (iv) through the writing of options. At the time a particular offering of the
Notes or the Common Stock is made, a Prospectus Supplement, if required, will be
distributed which will set forth the aggregate amount and type of Notes and
Common Stock being offered and the terms of the offering, including the name or
names of any underwriters, broker/dealers or agents, any discounts, commissions
and other terms constituting compensation from the Selling Holders and any
discounts, commissions or concessions allowed or reallowed or paid to
broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Notes and Common Stock will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions, the Notes and Common Stock may not be offered or sold unless they
have been registered or qualified for sale in such jurisdictions or an exemption
from registration or qualification is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Notes or the Common Stock may not
simultaneously engage in market-making activities with respect to such
securities for a two or nine business day period prior to the commencement of
such distribution. In addition to and without limiting the foregoing, each
Selling Holder and any other person participating in a distribution will be
subject to applicable provisions of the Exchange act and the rules and
regulations thereunder, including without limitation Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of any of the
securities by the Selling Holders or any such other person. All of the foregoing
may affect the marketability of the Notes and the Common Stock and the brokers'
and dealers' ability to engage in market-making activities with respect to these
securities.
Pursuant to the Registration Agreement, all expenses of the registration of
the Notes and Common Stock will be paid by the Company, including, without
limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Holders will
pay all underwriting discounts and selling commissions, if any. The Selling
Holders will be indemnified by the Company against certain civil liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith. The Company will be indemnified by the
Selling Holders against certain civil liabilities, including certain liabilities
under the Securities Act, or will be entitled to contribution in connection
therewith.
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Montgomery Securities
have provided services to the Company and to entities related to the Company and
may in the future provide services to the Company or such other entities, for
which they have received or expect to receive customary fees.
SELLING HOLDERS
The Notes were originally issued by the Company and sold by the Initial
Purchasers in a transaction exempt from the registration requirements of the
Securities Act, to persons reasonably believed by such Initial Purchasers to be
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act), other institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) or in transactions complying with the
provisions of Regulation S under the Securities Act. The Selling Holders (which
term includes their transferees, pledgees, donees or their successors) may from
time to time offer and sell pursuant to this Prospectus any or all of the Notes
and Common Stock issued upon conversion of the Notes.
The following table sets forth information with respect to the Selling
Holders and the respective principal amounts of Notes and shares of Common Stock
beneficially owned by each Selling Holder. Such information has been obtained
from the Selling Holders or such other sources as the Company deems reliable.
The information regarding the Selling Holders set forth below is based on
information provided to the Company by such Selling Holders as of the date
hereof. The Company will supplement this Prospectus from time to time to reflect
information regarding ownership of Notes or Common Stock received from Selling
Holders desiring to sell such securities pursuant to the Registration Statement.
Except as otherwise disclosed herein, none of the Selling Holders has,
or within the past three years has had, any position, office or other material
relationship with the Company or any of its predecessors or affiliates. Because
the Selling Holders may offer all or some portion of the Notes or the Common
Stock issuable upon conversion thereof pursuant to this Prospectus, no estimate
can be given as to the amount of the Notes or the Common Stock issuable upon
conversion thereof that will be held by the Selling Holders upon termination of
any such sales. In addition, the Selling Holders identified below may have sold,
transferred or otherwise disposed of all or a portion of their Notes, since the
date on which they provided the information regarding their Notes, in
transactions exempt from the registration requirements of the Securities Act.
Selling Holder Principal Amount of Number of
Notes Beneficially Owned Shares of Common Stock
and Offered Hereby Beneficially Owned (c)
--------------- -------------------------- -------------------------
Pecks Management
Partners Ltd. (a) 10,500,000 -
Harvard & Company 10,000,000 -
OCM Convertible Trust 5,225,000 -
General Motors Salaried
Employees Convertible Fund 5,030,000 -
MacKay Shields Financial
Corporation (b) 5,000,000 -
Oregon Equity Fund 3,800,000 -
Allstate Insurance Company 3,500,000 -
Pondwave & Company 3,395,000 -
Delta Airlines Master Trust 3,105,000 -
Pimco Equity Income 3,000,000 -
TCW Convertible
Securities Fund 2,915,000 -
SAIF Corporation 2,500,000 -
Pension Reserves
Investments Management 2,365,000 -
TCW Convertible
Value Fund 2,005,000 -
Pacific Mutual Life
Insurance Company 1,500,000 -
State of Michigan Employees'
Retirement Fund 1,295,000 -
State Employees' Retirement
Fund of the State
of Delaware 1,110,000 -
Delaware State Retirement
Fund - Froley, Revy 1,000,000 -
TCW Convertible
Strategy Fund 965,000 -
North Dakota State Workers
Compensation Fund 755,000 -
Strugeon & Company 750,000 -
AIM Management Incorporated 600,000 -
Cincinnati Bell Telephone
Convertible Value Fund 560,000 -
Massachusetts Mutual Life
Insurance Company 535,000 -
ICI American Holdings Pension 500,000 -
Zeneca Holdings Pension 500,000 -
WAFRA Discretionary Account 400,000 -
TCW/DW Income and Growth Fund 375,000 -
North Dakota State
Land Department 290,000 -
OCM Convertible Limited
Partnership 270,000 -
Kapiolani Medical Center 250,000 -
Nalco Chemical Retirement Trust 200,000 -
Medical Malpractice Insurance
Association 115,000 -
(a) Held in investment advisor capacity for the following entities in the
amounts indicated: Teepak, Inc. Master Trust - 75,000; Christian Science
Trustees for Gifts and Endowments - 220,000; Hillside Capital Incorporated
Corporate Account - 245,000; First Church of Christ, Scientist - Endowment -
275,000; Thermo Electron Balanced Investment Fund - 405,000; Declaration of
Trust for the Defined Benefit Plans of ZENECA Holdings Inc - 445,000;
Declaration of Trust for the Defined Benefit Plans of ICI American Holdings Inc
- - 665,000; Delaware State Employees Retirement Fund - 2,210,000; and General
Motors Domestic Group Trust - 5,960,000
(b) Held In investment Advisor capacity for the following entities in the
amounts indicated: New York Life Separate Account #7 - 1,250,000; and Cypress &
Co. - 3,750,000
(c) Does not include shares of Common Stock issuable upon conversion of Notes.
LEGAL MATTERS
The validity of the Notes and the shares of Common Stock issuable upon
conversion thereof have been passed upon for the Company by Powell, Goldstein,
Frazer & Murphy, Atlanta, Georgia, counsel for the Company.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995,
incorporated by reference into this Prospectus and Registration Statement, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
Accounting and Auditing.
<PAGE>
[Back Cover Page of Prospectus]
[Left Column]
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Offering Memorandum in connection with the offer made by this Offering
Memorandum and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. Neither the delivery of
this Offering Memorandum nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date as of which information is given in this
Offering Memorandum. This Offering Memorandum does not constitute an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to any person to whom it is unlawful to make such
solicitation.
Table of Contents
Page
Available Information
Information Incorporated by Reference
Summary
Risk Factors
Use of Proceeds
Price Range of Common Stock and
Dividend Policy
Capitalization
Selected Consolidated Financial Data
Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Business
Description of Notes
Description of Capital Stock
Certain Federal Income Tax
Considerations
Selling Holders
Plan of Distribution
Legal Matters
Independent Auditors
[End of left column]
- --------------------------------------------------------------
[Right column]
$287,500,000
SCI Systems, Inc.
5% Convertible Subordinated Notes Due 2006
Salomon Brothers Inc
Merrill Lynch & Co.
Montgomery Securities
Prospectus
Dated June 10, 1996
[End of right column]
[End of Back Cover Page of Prospectus]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses to be paid by the
Company in connection with the sale and distribution of the securities being
registered, other than underwriting discounts and commissions. All of the
amounts shown are estimated except the Securities and Exchange Commission
registration fee and the Nasdaq additional listing fee.
SEC registration fee........................$ 99,137.93
Legal and accounting fees and expenses (1).. 50,000.00
---------
$149,137.93
==========
(1) Estimate of maximum amount of such expense.
Item 15. Indemnification of Directors and Officers.
The Company's Second Restated Certificate of Incorporation (the
"Certificate of Incorporation") requires that the Company indemnify every
director and officer, and his or hers heirs, executors and administrators,
against expenses reasonably incurred by him or her in connection with any
action, suit or proceeding to which he or she may be made a party by reason of
being or having been an officer of the Company, except with respect to matters
as to which he or she is finally adjudged in such action, suit or proceeding to
have been liable thereunder by reason of negligence or misconduct. The
Certificate of Incorporation further provides that in the event a claim against
a director or officer is settled, indemnification may only be provided in
connection with matters covered by the settlement as to which the Company is
advised by its counsel that the person to be indemnified did not commit a breach
of duty to the Company.
In accordance with Section 102(b)(7) of the Delaware General
Corporation Law (the "DGCL"), the Certificate of Incorporation of the Company
contains a provision to limit the personal liability of the directors of the
Company for violations of their fiduciary duties. This provision eliminates each
director's liability to the Company or its stockholders for monetary damages
except (I) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL providing for liability of directors for unlawful payment of dividends
or unlawful stock purchases or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit. The effect of this
provision is to eliminate the personal liability of directors for monetary
damages for actions involving a breach of their fiduciary duty of care,
including any such actions involving gross negligence.
The Company's Amended and Restated Bylaws (the "Bylaws") provide that,
subject to certain limited exceptions set forth therein, the Company may
indemnify any person, including officers and directors, who are, or are
threatened to be made, parties to any threatened, pending or completed legal
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company), by
reason of the fact that such person was an officer, director, employee or agent
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation. The indemnity may
include expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, provided that the Board of Directors,
independent legal counsel or a majority of shareholders, as the case may be,
determine that such officer, director, employee or agent acted in good faith and
in a manner he reasonably believed to be in or not opposed to the corporation's
best interests and, for criminal proceedings, had no reasonable cause to believe
that his conduct was unlawful (unless the individual in question has entered
into an agreement providing for a standard of care different than that set forth
above, in which case such standard would be controlling in determining any
rights to indemnification). The Bylaws further provide that the Company may
indemnify officers and directors in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in defense of any action referred to above, the corporation
must indemnify him against the expenses which such officer or director actually
or reasonably incurred. In addition, the Bylaws further provide that the Company
may maintain officers' and directors' liability insurance which insures against
liabilities that officers and directors of the Company may incur in such
capacities.
<PAGE>
ITEM 16. EXHIBITS
Exhibit No. Description of Exhibit
+ 4.1 Second Restated Certificate of Incorporation, as amended
+ 4.2 Bylaws of the Company, as amended
+ 4.3 Indenture dated as of April 23, 1996 between the Company and PNC
Bank, Kentucky, Inc., as trustee, relating to the Company's 5%
Convertible Subordinated Notes due 2006
+ 4.4 Registration Agreement dated as of April 23, 1996 by and among
the Company, Salomon Brothers Inc, Merrill Lynch & Co., and
Montgomery Securities, as initial purchasers
+ 5.1 Opinion of Powell, Goldstein, Frazer & Murphy
+ 12 Statement regarding computation of ratio of earnings to fixed charges
+ 23.1 Consent of Powell, Goldstein, Frazer & Murphy (included as part of
Exhibit 5.1 hereto)
23.2 Consent of Ernst & Young LLP
+ 24.1 Power of Attorney (see the signature pages hereto)
+ 25.1 Form T-1 Statement of Eligibility and Qualification of Trustee
+ Previously submitted.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Huntsville, State of Alabama, on the 19 day of July,
1996.
SCI SYSTEMS, INC.
By: /s/ Michael M. Sullivan
------------------------
Michael M. Sullivan
Secretary and Corporate Counsel
Signature Title Date
*
-----------------
Olin B. King Chairman of the Board
and
Chief Executive Officer
(Principal Executive, Accounting
And Financial Officer) July 19, 1996
*
------------------------
A. Eugene Sapp, Jr. Director, President and
Chief Operating Officer July 19, 1996
*
-----------------------
Howard H. Callaway Director July 19, 1996
*
---------------------
William E. Fruhan Director July 19, 1996
*
-------------------
Joseph C. Moquin Director July 19, 1996
*
-------------------
Wayne Shortridge Director July 19, 1996
*
----------------
G. Robert Tod Director July 19, 1996
*
-----------------
Jackie M. Ward Director July 19, 1996
* /s/ Michael M. Sullivan
------------------------
Michael M. Sullivan
Attorney-in-Fact
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of SCI Systems, Inc.
for the registration of Convertible Subordinated Notes and 5,897435 shares of
its common stock and to the incorporation by reference therein of our report
dated August 3, 1995, with respect to the consolidated financial statements of
SCI Systems, Inc. incorporated by reference in its Annual Report (Form 10-K) for
the year ended June 30, 1995 and the related financial statement schedule
included therein, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Birmingham, Alabama
July 19, 1996
END OF EXHIBIT 23.2
<PAGE>
