SCHEDULE 14A - INFORMATION REQUIRED IN PROXY
STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securitites Exchange Act - 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
- --------------------------------------------------------------------------------
SCI SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
...........................................................................
(2) Aggregate number of securities to which transaction applies:
...........................................................................
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
...........................................................................
(5) Total fee paid:
...........................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previos filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
............................................................................
(2) Form, Schedule or Registration Statement No.:
............................................................................
(3) Filing Party:
............................................................................
(4) Date Filed:
............................................................................
<PAGE>
SCI SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 24, 1997
To the Shareholders of SCI Systems, Inc.:
Notice is hereby given that the 1997 Annual Meeting of shareholders of SCI
Systems, Inc., a Delaware corporation, will be held at 10:00 A.M., Mountain
Time, on Friday, October 24, 1997, at the Company's Facility located at 702
Bandley Drive, Fountain, Colorado 80817 (the "Meeting"), for the following
purposes:
(1) to elect Class I Directors to serve for a term of three years;
(2) approval of Amendment of the Company's Second Restated Certificate
of Incorporation to increase the number of shares of the Company's
authorized Common Stock (par value $0.10) from 100 million to 200
million shares;
(3) to act upon a proposal to ratify the selection of Ernst &Young LLP as
the Company's independent auditor for the fiscal year ending June 30,
1998; and
(4) to transact such other business as may properly come before the Meeting
and any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on September 12, 1997,
as the record date for the determination of shareholders entitled to notice of
and to vote at such Meeting and any adjournment or postponement thereof.
It is important that your shares be represented and voted at the Meeting.
Accordingly, you are requested to please date, sign, and mail the enclosed proxy
as promptly as possible. Thank you for your cooperation.
By order of the Board of Directors,
[GRAPHIC OMITTED]
Michael M. Sullivan
Secretary
Huntsville, Alabama
September XX, 1997
Please sign, date and promptly mail the enclosed white proxy card in the postage
paid envelope provided.
<PAGE>
SCI SYSTEMS, INC.
c/o SCI Systems (Alabama), Inc.
P.O. Box 1000
Huntsville, Alabama 35807
PROXY STATEMENT
This Statement is furnished in connection with the solicitation by the Board
of Directors of SCI Systems, Inc. (the "Board" and the "Company") of proxies to
be voted at the Annual Meeting of shareholders of the Company to be held at
10:00 A.M., Mountain Time, on Friday, October 24, 1997, at the Company's
Facility located at 702 Bandley Drive, Fountain, Colorado 80817 and at any and
all adjournments or postponements of such meeting (the "Meeting"). If the
enclosed form of proxy is executed, returned in time, and not revoked, it will
be voted in accordance with the specifications, if any, made by the shareholder,
and if specifications are not made, it will be voted for election of the
director nominees named herein, for approval of the Proposal to amend the
Company's Second Restated Certificate of Incorporation to increase the number of
shares of the Company's authorized Common Stock (par value $0.10)(the "Common
Stock") from 100 million to 200 million shares, and for ratification of the
selection of Ernst & Young LLP as the Company's independent auditor as described
in this Proxy Statement. If other matters are properly presented at the Meeting,
it is the intention of the persons designated as proxies to vote on them in
accordance with their best judgment.
Shareholders who execute proxies may revoke them at any time before they are
voted by filing with the Secretary of the Company either an instrument revoking
the proxy, or a duly executed proxy bearing a later date. Proxies also may be
revoked by any shareholder present at the Meeting who expresses a desire to vote
his or her shares in person. A majority of the shareholders entitled to vote
must be present in person, or represented by proxy, to constitute a quorum and
act upon the proposed business. Failure of a quorum to be represented at the
Meeting will necessitate adjournment and will subject the Company to additional
expense. When a quorum is present at any meeting, an affirmative vote of a
majority of the number of shares of stock present, or represented by proxy, at
the Meeting and entitled to vote shall decide any question brought before the
Meeting. However, directors shall be elected by an affirmative vote of a
plurality of the shares present in person, or represented by proxy at the
Meeting, and entitled to vote on the election of directors. The proposed
amendment to the Company's Second Restated Certificate of Incorporation must be
approved by the holders of a majority of the number of shares outstanding and
entitled to vote on the proposed amendment. Abstentions will have the effect of
negative votes with respect to any matter presented at the Meeting, other than
election of directors, while broker nonvotes will have no effect on any matter
presented. If authority to vote for one or more of the director nominees is
withheld on a proxy card, no vote will be cast with respect to the shares
indicated on that proxy card and the outcome of the election will not be
affected.
The Notice of the Meeting, this Proxy Statement, and the form of proxy were
first mailed to shareholders on or about September XX, 1997.
VOTING SECURITIES
At the close of business on September 12, 1997, the record date for
determining shareholders entitled to notice and to vote at the Meeting, there
were outstanding XX,XXX,XXX shares of Common Stock. Each share is entitled to
one vote.
The following table sets forth certain information concerning each person
known to the Board to be a beneficial owner of more than five percent of the
outstanding shares of Common Stock as of December 31, 1996 (the ownership of the
directors and executive officers of the Company being included elsewhere
herein).
Name and Address Amount Beneficially Percent of
of Beneficial Owner Owned (1) Class (1)
- ---------------------- ------------------- -----------
FMR Corporation 8,828,000 14.83%
82 Devonshire Street
Boston, Massachusetts 02109-3614
(1) According to a Schedule 13G dated February 14, 1997, filed pursuant to the
Securities Exchange Act of 1934, after adjustment for August 22, 1997's
two-for-one stock split.
<PAGE>
Ownership of Equity Securities in the Company
The following table sets forth information regarding beneficial ownership of
Common Stock by each director, the Named Executive Officers, and the directors
and executive officers of the Company as a group as of September 12, 1997.
Aggregate Number of Shares Percentage of
Name Beneficially Owned Outstanding Shares
- ------------------------ -------------------------- ------------------
Olin B. King X,XXX,XXX (1) X.XX
A. Eugene Sapp, Jr XXX,XXX (1) *
David F. Jenkins XX,XXX (2) *
Howard H. Callaway XX,XXX (3) *
Jerry F. Thomas XX,XXX (4) *
Peter M. Scheffler XX,XXX (4) *
Jackie M. Ward X,XXX (5) *
G. Robert Tod X,XXX (6) *
William E. Fruhan X,XXX (7) *
Wayne Shortridge X,XXX (8) *
LeRoy H. Mackedanz X,XXX (9) *
George J. King X,XXX (10) *
Charles N. Parks X,XXX (11) *
All Directors and Executive
Officers as a group (XX persons) X,XXX,XXX (12) X.XX
* Indicates less than 1% of issued and outstanding shares of Common Stock.
(1) Includes 322,750 and 102,400 shares not presently owned by Messrs. King and
Sapp, respectively, but which are subject to stock options exercisable
within 60 days after September 12, 1997.
(2) Includes 53,000 shares not presently owned but which are subject to stock
options exercisable within 60 days after September 12, 1997.
(3) Includes X,XXX shares owned by Mr. Callaway's spouse, X,XXX shares owned of
record by the Howard H. Callaway Foundation, Inc. , 1,940 shares not
presently owned by Mr. Callaway but which are subject to stock options
exercisable within 60 days after September 12, 1997, and 2,179 shares owned
through the Company's Directors' Deferred Compensation Plan. Mr.Callaway
is an officer and Trustee of the Foundation and, as such, shares voting
and investment powers with respect to the shares owned by the Foundation.
Nothing in this paragraph should be construed as an admission by Mr.
Callaway of beneficial ownership of the shares owned by his spouse.
(4) Includes 13,200 and 12,400 shares not presently owned by Messrs. Thomas and
Scheffler, respectively, but which are subject to stock options exercisable
within 60 days after September 12, 1997.
(5) Includes X,XXX shares owned by the estate of Ms. Ward's deceased husband,
970 shares not presently owned by Ms. Ward but which are subject to stock
options exercisable within 60 days of September 12, 1997, and 3,123 shares
owned through the Company's Directors' Deferred Compensation Plan. Ms. Ward
does not have voting power over the shares and is not a beneficiary of the
estate of her deceased husband. Reporting of her husband's shares is not
an admission by Ms. Ward of beneficial ownership of those shares.
(6) Includes 484 shares not presently owned by Mr. Tod but which are subject to
stock options exercisable within 60 days of September 12, 1997, and 2,906
shares owned through the Company's Directors' Deferred Compensation Plan.
(7) Includes 3,089 shares owned through the Company's Directors' Deferred
Compensation Plan.
(8) Includes 3,229 shares owned through the Company's Directors' Deferred
Compensation Plan.
(9) Includes 71,900 shares not presently owned by Mr. Mackedanz but which are
subject to stock options exercisable within 60 days of September 12, 1997.
(10) Includes 14,800 shares not presently owned by Mr. King but which are
subject to stock options exercisable within 60 days of September 12, 1997.
(11) Includes 22,800 shares not presently owned by Mr. Parks but which are
subject to stock options exercisable within 60 days of September 12, 1997.
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
Nominees for Board of Directors
In accordance with the Company's Second Restated Certificate of Incorporation,
the Board is divided into three classes, with each class consisting, as nearly
as possible, of one third of the total number of directors fixed by the Board.
The Company's Bylaws provide that the number of directors shall be not less than
three (3) and not more than eleven (11), and that the exact size of the Board
may be fixed from time to time by the Board. The Board has currently fixed the
number of directors at seven, with two directors in Class I, three in Class II,
and two in Class III. Board members serve three-year terms which are staggered
to provide for election of one director class each year. Class I directors are
to be elected at the Meeting.
The Board has nominated and proposes Olin B. King and Howard H. Callaway for
election as Class I directors, and requests shareholders approval of the
nominees. It is intended that the proxies will be voted for the re-election of
the two nominees to serve as directors of the Company for a term of three years
and until their respective successors are elected and qualified. The proxies
cannot be voted for a greater number of persons than the number of nominees
named herein. In the event any of the nominees refuses or is unable to serve as
a director (which is not now anticipated), the person(s) acting as proxies
reserve full discretion to vote for such other persons as may be nominated.
Information About Director Nominees and Continuing Directors
Based upon information supplied by them, the table below sets forth for each
director nominee and continuing director their name, age, positions with the
Company, principal occupation and business experience for the last five years,
and prior service as a director of the Company.
<TABLE>
<CAPTION>
Positions with the Company Director
Name and Age And Principal Occupation Since
------------------------- -------------------------------------------------------------------------- -----
Class I Director Nominees
(Term expiring in 2000)
-------------------------
<S> <C> <C>
Olin B. King (4) Chairman of the Board and Chief Executive Officer of SCI Systems, Inc. 1961
(63)
Howard H. Callaway (2) (3) Chief Executive Officer, Crested Butte Mountain Resort, Inc., Crested Butte,
(70) CO, a resort complex, since 1979; Chairman, Callaway Gardens Resort, Inc., 1976
Pine Mountain, GA, a resort complex,since January 1994.
Class III Directors
(Term expiring in 1999)
-------------------------
G. Robert Tod (2) (3) President and Chief Operating Officer, CML Group, Inc., Acton, MA, 1981
(58) a specialty marketing company, since 1969.
A. Eugene Sapp, Jr. (1) (4) President and Chief Operating Officer of SCI Systems, Inc. 1981
(61)
Class II Directors
(Term expiring in 1998)
Jackie M. Ward (1) (2) Chief Executive Officer, Computer Generation Incorporated, Atlanta, GA, 1992
(59) a provider of turn-key telecommunications systems products and data process-
ing services to U.S. and international markets, 1968 to present.
Wayne Shortridge (1) (4) Partner, Paul, Hastings, Janofsky & Walker LLP, Altlanta, GA, 1992
(59) January 1994 to present; Partner, Powell, Goldstein, Frazer & Murphy,
Atlanta, GA, 1968 to January 1994.
William E. Fruhan (1) (3) The George E. Bates Professorship, Harvard University Graduate School 1992
(54) of Business, Boston, MA, 1979 to present.
(1) Member of the Investment Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) Member of the Executive Committee
<PAGE>
Certain of the continuing directors and director nominees also serve as directors of other publicly held companies as follows:,
Mr. Callaway CML Group, Inc.; Mr. King, Regions Financial Corporation; Mr. Sapp, VBand Corporation and Computer Products, Inc.;
Mr. Tod, EG&G, Inc.; CML Group, Inc., and UST Corp.; Dr. Fruhan, Prudential Institutional Fund; and Ms. Ward, TRIGON Blue Cross
Blue Shield, Nations Bank Corporation, and Matria Healthcare, Inc.
</TABLE>
Meetings and Committees
The Board has standing Executive, Investment, Compensation, and Audit
Committees. The Board does not have a standing Nominating Committee as the
Executive Committee acts as such.
During fiscal year 1997 the Board met four times; the Executive Committee
twelve times; the Investment Committee five times; the Compensation Committee
twice; and the Audit Committee once.
Consisting entirely of outside directors, the Audit Committee is responsible
for reviewing the Company's financial statements, evaluating the Company's
internal financial controls and procedures, and coordinating and approving the
activities of the Company's auditors.
Consisting entirely of outside directors, the Compensation Committee is
responsible for setting compensation guidelines for executives of the Company,
establishing their salaries, reviewing and approving incentive compensation
plans and bonus awards, and reporting all of the foregoing to the outside
members of the Board for approval.
The Executive Committee functions with substantially all of the powers and
duties of the Board; however, the Committee does not have authority to approve
mergers, amend the Certificate of Incorporation or Bylaws, or dispose of all or
substantially all of the Company's assets. The Executive Committee also
functions as the nominating committee of the Company and will consider proposed
directorship nominations if recommended by shareholders in writing to the
Secretary of the Company.
The Investment Committee is responsible for reviewing the investment funds of
the Company and of each employee benefit trust established by the Company, and
for directing the investment funds of the Company's Supplemental Retirement
Plan.
During fiscal 1997 the six outside directors were paid an annual fee of
$30,000 plus $1,000 per Board meeting attended and $500 per committee meeting
attended, except that Mr. Shortridge was paid the greater of $1,000 or $300 per
hour for each Executive Committee Meeting attended.
In 1995 the Company adopted a Directors' Deferred Compensation Plan pursuant
to which nonemployee Directors may elect in advance to defer all or part of
their Director's fees in return for stock equivalent rights equal to the number
of shares of Common Stock which he or she could have purchased at the full
market price with the deferred fees. If a Director elects to defer 100% of his
or her fees earned during an entire year, the Director will also be entitled to
additional stock equivalent rights at the full market price equal to 40% of the
deferred fees. The deferred fees and any additional earned stock equivalent
rights are contributed by the Company to a rabbi trust which purchases Common
Stock in the open market as the Directors' fees are deferred and holds the
Common Stock in the name of the Director participant. On termination of a
Director's service from the Board for any reason, all stock equivalent rights
earned by the Director pursuant to the Plan will be paid out to him or her by
the trust in Common Stock held in his or her name. The Directors' Deferred
Compensation Plan largely replaced the directors' stock option feature of the
Company's 1994 Stock Option Incentive Plan (the "1994 Plan").
The following Directors elected to defer receipt of 100% of their Board fees
for fiscal year 1997 pursuant to the Directors' Deferred Compensation Plan: Dr.
Fruhan, Messrs. Callaway, Shortridge, Tod, Ms. Ward, and Director Emeritus
Moquin. No director exercised stock options during the year.
The Board of Directors recommends a vote "FOR" the re-election of the director
nominees named above.
PROPOSAL 2-AMENDMENT OF THE COMPANY'S
SECOND RESTATED CERTIFICATE OF INCORPORATION
The Company's Second Restated Certificate of Incorporation ("Certificate of
Incorporation") presently provides that the Company is authorized to issue
100,000,000 shares of Common Stock. The Board of Directors recommends and
proposes that the authorized Common Stock of the Company be increased from
100,000,000 to 200,000,000 shares and that the Certificate of Incorporation be
so amended. The additional shares of Common Stock for which authorization is
sought would be a part of the Company's existing class of Common Stock and, if
and when issued, would have the same rights and privileges as the shares of
Common Stock now outstanding.
As of September 12, 1997, there were XX,XXX,XXX shares of Common Stock issued
and outstanding and 59,726 shares of Common Stock held as treasury stock. An
aggregate of 3,481,500 shares are subject to issuance under the Company's stock
option plans. 11,794,870 shares of Common Stock are reserved for issuance to
holders of the Company's 5% Convertible Subordinated Notes due 2006.
<PAGE>
The Board recommends the increase in authorized Common Stock to enable the
Company to have additional shares available for possible issuance in connection
with such general corporate purposes as stock splits and stock dividends,
issuance of shares for cash to raise equity capital, conversions of convertible
securities, or in connection with business acquisitions, stock option plans, or
other employee benefit plans which may be adopted in the future. The Board
believes that additional authorized Common Stock will give the Company greater
flexibility and may allow shares of Common Stock to be issued without the
expense and delay of a shareholders' meeting to authorize additional shares if
and when the need arises.
If the proposed amendment is adopted, the Company would be permitted to issue
the authorized shares without further shareholder approval, except to the extent
otherwise required by law, by a securities exchange or association on which the
Common Stock is listed or quoted at the time, or by the Second Restated
Certificate of Incorporation. Shareholders do not have pre-emptive rights to
subscribe for or purchase additional shares of the Company's Common Stock.
The Company has no current plans, agreements or arrangements for the issuance
of additional Common Stock, other than the purchase of shares pursuant to its
stock option plans and conversion pursuant to the Company's 5% Convertible
Subordinated Notes due 2006. However, the additional authorized shares would be
available for issuance (subject to further shareholder approval only as noted
above) at such times and for such proper corporate purposes as the Board of
Directors may approve, including possible future financing and acquisition
transactions. Depending upon the nature and terms thereof, while the Board has
no present plans in this regard, such transactions could enable the Board to
make more difficult, or discourage an attempt, to obtain control of the Company.
For example, the issuance of shares of Common Stock in a public or private sale,
merger, or similar transaction would increase the number of the Company's
outstanding shares, thereby diluting the interest of a party seeking to take
over the Company. Furthermore, many companies have recently issued warrants or
other rights to acquire additional shares to holders of common stock to
discourage or defeat unsolicited stock accumulation programs and acquisition
proposals. If Proposal 2 is adopted, more Common Stock of the Company would be
available for such purposes than is currently available. Management currently
knows of no intent or plan on the part of any persons or entity to gain control
of the Company and Proposal 2 is not being recommended in response to any such
intent or plan.
If Proposal 2 is adopted, the Second Restated Certificate of Incorporation of
SCI Systems, Inc., as in force and effect on the date of this Proxy Statement,
will be amended by deleting Section (a) of Article FOURTH in its entirety and by
substituting in lieu thereof the following:
"FOURTH. (a) The aggregate number of shares which the corporation shall
have the authority to issue is Two Hundred Million (200,000,000)
shares of common stock with par value of ten cents ($0.10) per share
(hereinafter called the "Common Stock"). At every meeting of the
stockholders, every holder of stock of the corporation, be it Common
Stock or Preferred Stock, shall be entitled to one vote, in person or
by proxy, for each share of Common Stock or Preferred Stock standing
in his name on the books of the corporation. The Common Stock and the
Preferred Stock shall vote together as one class unless otherwise
expressly required by law."
The Board of Directors recommends a vote "FOR" the proposal to amend Article
FOURTH, section (a) of the Second Restated Certificate of Incorporation.
PROPOSAL 3-RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
Ernst & Young LLP has served as independent auditor for the Company since 1961
and has been selected by the Board of Directors to audit the books and records
of the Company for the fiscal year ending June 30, 1998. The Board of Directors
proposes that its selection of Ernst & Young LLP as the Company's independent
auditor be ratified by shareholders at the Meeting. If the shareholders do not
ratify this selection, the selection of another firm will be considered by the
Board. The Audit Committee of the Board is of the opinion that the retention of
the services of Ernst & Young LLP is in the best interests of the Company. A
representative of Ernst & Young LLP is expected to be present at the Meeting to
respond to appropriate questions and to make a statement if he or she so
desires.
The Board of Directors recommends a vote "FOR" ratification of Ernst & Young
LLP as Auditor for fiscal year 1998.
EXECUTIVE OFFICERS
Officers of the Company are elected by the Board annually and serve at the
pleasure of the Board. Information concerning certain of the executive officers
of the Company is contained in the following Summary Compensation Table and
other tables set forth in this Proxy Statement.
Messrs. Olin B. King and A. Eugene Sapp, Jr. are officers of SCI Systems,
Inc. and of one or more of its subsidiaries; all other executive officers are
officers of one or more Company subsidiaries.
<PAGE>
Messrs. King and Sapp have held various positions with the Company since 1961
and 1962, respectively, and have been Chairman and CEO, and President and COO,
respectively, since prior to 1990.
Mr. Richard A. Holloway, age 55, joined the Company in April 1986 as Senior
Vice President, Government Division.
Mr. Jeffrey L. Nesbitt, age 46, joined the Company in 1985 as Plant Manager
and was promoted to Vice President in 1987, to Senior Vice President, Eastern
Region, in 1991, and in 1997 became Senior Vice President of the European
Division.
Mr. David F. Jenkins, age 60, joined the Company in 1990 as Vice President and
was promoted to Senior Vice President, Western Division, in 1991.
Mr. Jerry F. Thomas, age 56, has held various positions with the Company
since 1963. In 1987 he was named Vice President, in September 1993 he was
promoted to Senior Vice President, Central Region, and in 1997 became Senior
Vice President of the newly formed Computer Systems Division.
Mr. Peter M. Scheffler, age 46, joined the Company as Senior Vice President,
Asian Division, in January 1994. From June 1993 to January 1994 Mr. Scheffler
was Senior Director of Worldwide Manufacturing for Apple Computer, Inc. From
1988 through June 1993 Mr. Scheffler held a variety of management positions with
Apple Computer, Inc.
Mr. George J. King, age 41, has held various positions with the Company since
1978. In 1992 he was named Vice President and in 1997 was promoted to Senior
Vice President of the Southeastern Division. Mr. King is the son of Olin B.
King, Chairman and Chief Executive Officer of the Company.
Mr. Charles N. Parks, age 41, joined the Company in 1988 as Vice President and
in 1997 was promoted to Senior Vice President of the Mexican Division.
Mr. LeRoy H. Mackedanz, age 54, joined the Company in 1987. In 1989 he was
named Vice President and in 1997 was promoted to Senior Vice President of the
Northeastern Division.
EXECUTIVE COMPENSATION
SEC regulations require disclosure to shareholders of executive compensation
in prescribed formats. The required information is comprised of a Summary
Compensation Table, additional tables which provide further details of stock
options and similar forms of compensation, a report on executive compensation
from the Compensation Committee of the Board of Directors, and a five year stock
performance graph.
The following table summarizes for the last three completed fiscal years the
compensation of the five most highly compensated executive officers including
the Chief Executive Officer ("Named Executive Officers") of the Company whose
salary and bonus exceeded $100,000 for the year ended June 30, 1997:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
------------Annual Compensation----------------- Compensation
Name and Total Securities All Other
Principal Annual Underlying Compensation
Position Year Salary ($) Bonus ($)(a) Compensation ($) Options (#)(d) ($)
-------- ---- ---------- ------------ ---------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Olin B. King, 1997 599,442 1,127,130 1,726,572 100,000 21,580(b)
Chairman & CEO 1996 504,051 809,547 1,313,598 90,000 18,146(b)
1995 464,709 452,426 917,135 80,000 16,596(b)
A. Eugene Sapp, Jr., 1997 436,919 732,635 1,169,554 75,000 15,729(b)
President & COO 1996 382,326 526,205 908,531 60,000 13,764(b)
1995 358,309 294,077 652,386 56,000 12,444(b)
Jerry F. Thomas, 1997 189,092 30,000 6,807(b)
Senior Vice President, 1996 172,181 173,700 345,881 28,000 6,183(b)
Computer Products Division 1995 161,371 105,833 267,204 24,000 5,809(b)
David F. Jenkins 1997 216,604 30,000 5,198(b)
Senior Vice President, 1996 196,953 128,478 325,431 28,000 4,727(b)
Western Division 1995 182,282 153,791 336,073 24,000 3,281(b)
Peter M. Scheffler, 1997 208,908 24,000 308,891(c)
Senior Vice President, 1996 195,459 67,291 262,750 24,000 236,277(c)
Asian Division 1995 189,510 65,599 255,109 16,000 213,455(c)
</TABLE>
(a)The 1997 bonus is a good faith estimate of the amount payable when final
accounting is completed and approved by the Board of Directors.
(b)Amounts represent the Company's contributions to the Company's 401(k) and
Deferred Compensation Plans, which Plans are available to all eligible
employees.
(c)Amounts represent contributions of $3,760 in 1997, $3,518 in 1996, and $1,654
in 1995 to the Company's 401(k) and Deferred Compensation Plans, with the
remainder representing foreign living and car allowances.
(d)Adjusted for August 22, 1997's two-for-one stock split.
<PAGE>
Stock Option Grants in Last Fiscal Year
Prior to October 28,1994, the Company granted stock options to executive
officers and other key employees pursuant to its Incentive Stock Option and
Nonqualified Stock Option Plans, and after October 28, 1994, pursuant to the
1994 Plan. The Company does not grant Stock Appreciation Rights (SARs). The
following table sets forth certain information regarding stock options granted
to the Named Executive Officers during fiscal year 1997 under the 1994 Plan
after adjustment for August 22, 1997's two-for-one stock split.
<TABLE>
<CAPTION>
Potential Realizable
Number of Value at Assumed
Securities % of Total Annual Rates of Stock
Underlying Options Granted to Price Appreciation for
Options Employees in Exercise or Base Expiration Option Term
Name Granted (#) Fiscal Year Price ($/SH) Date 5% ($) 10% ($)
---- ----------- ----------------- ---------------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Olin B. King 100,000 15.48 24.875 10/25/06 1,564,375 3,964,434
A. Eugene Sapp, Jr. 75,000 10.84 24.875 10/25/06 1,075,063 2,775,104
David F. Jenkins 30,000 4.64 27.875 10/25/06 469,312 1,189,330
Jerry F. Thomas 30,000 4.64 27.875 10/25/06 469,312 1,189,330
Peter M. Scheffler 24,000 3.72 24.875 10/25/06 375,450 951,464
</TABLE>
The assumed annual rates of appreciation of five and ten percent would result in
the price of the Company's common stock increasing by $15.64 and $39.64,
respectively, by the end of the option term.
Aggregated Option Exercises in Fiscal Year 1997 and
Fiscal Year-End Option Values
The following table summarizes options exercised during fiscal year 1997 and
presents the value of unexercised options held by the Named Executive Officers
at fiscal yearend under all stock option Plans:
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired Value at Fiscal Year End (#) At Fiscal Year End ($)
Name on Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Olin B. King -0- -0- 575,000 182,000 14,604,562 2,418,250
A. Eugene Sapp, Jr. 158,000 3,853,375 156,400 125,600 3,238,600 1,166,900
David F. Jenkins 19,500 550,875 84,800 55,200 1,879,275 734,100
Jerry F. Thomas 85,850 1,772,344 6,000 54,400 42,000 715,900
Peter M. Scheffler 11,200 178,500 2,800 24,800 19,600 326,250
</TABLE>
Supplemental Retirement Plan: The Company's Supplemental Retirement Plan
("SRP") is a noncontributory, defined benefit pension plan which provides fixed
benefits to members upon their retirement, death or termination of employment
after at least 5 years of service with the Company or its subsidiaries. The SRP
is sponsored by SCI Systems (Alabama), Inc. ("Plan Sponsor"), a wholly owned
subsidiary of the Company.
All employees of the Plan Sponsor and its participating affiliates are
eligible to participate in the SRP. The SRP provides for a benefit accrual each
year for up to 35 years equal to 1% of employee compensation in excess of
$10,000 and, as of January 1, 1989, 1/2% of the first $10,000. Employee
compensation covered by the SRP is the total compensation that would be subject
to Social Security taxes as actually paid to the employee during a calendar
year, but excluding supplemental compensation awards, subject to a limitation
beginning January 1, 1989. Compensation deferred by participants under the
Deferred Compensation Plan is not included as part of the employee covered
compensation in the year of deferral.
Based on past years' compensation covered by the SRP, and assuming normal
retirement age and a 5.5% annual increase in covered compensation from calendar
year 1997 until retirement, estimated annual benefits payable upon retirement to
the Named Executive Officers are as follows: Mr. O. King, $58,745; Mr. Sapp,
$51,996; Mr. Jenkins, $24,338; Mr. Thomas, $35,823 and for Mr. Scheffler,
$72,736. These estimated benefits are subject to the Internal Revenue Code of
1986 (the "Code") ss.415 maximum benefit limitations. In addition, these
benefits do not reflect the maximum limitation on includable employee
compensation under Code ss.401(a)(17) effective for plan years beginning in
1989. The maximum limitation in 1997 is $150,000, subject to cost of living
increases as prescribed by the Secretary of the Treasury.
<PAGE>
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Company's Board of Directors (the
"Committee") consists of three Directors who are neither employees nor officers
of the Company. The Committee reviews the Company's executive compensation
program and policies each year and determines the compensation of the officers.
The Committee's recommendations of compensation for the Chief Executive Officer
and the other officers are reviewed with and approved by all the nonemployee
directors, who constitute a majority of the Board.
The Committee's overall policy regarding compensation of the Company's
officers is to provide competitive salary levels and compensation incentives
that attract and retain individuals of outstanding ability; that recognize
individual performance and the performance of the Company relative to the
performance of other companies of comparable size and quality; and that support
both the short-term and long-term goals of the Company.
The executive compensation program includes three elements which, taken
together, constitute a flexible and balanced method of establishing total
compensation for management. These elements are base salary, annual incentive
awards in the form of annual cash bonuses, and long-term incentive awards in the
form of stock option grants.
Base Salaries:
The Committee annually reviews and establishes officer base salaries.
Individual salaries are determined by the Committee's assessment of the
individual's experience level, the scope and complexity of the position held,
and the salaries being paid for similar positions in the industry based upon the
Company's knowledge of competitive salaries in the marketplace.
Annual Incentive Program:
The goal of the annual incentive, or bonus, program is to place a significant
portion of the officers' and senior managers' cash compensation at risk to
encourage and reward a continued high level of performance each year. Individual
incentive amounts are determined by the Committee generally based upon
profitability of the individual's business unit and his or her organizational
responsibility.
The CEO and COO do not participate in the same annual incentive program as
other Company officers. Annual incentive compensation for Messrs. O. King,
Chairman and CEO, and Sapp, President and COO, is granted pursuant to the
Company's Senior Executive Officer Annual Incentive Plan and is based upon the
Company's annual profits. This incentive compensation has been set for several
years at 1% of the Company's annual net income for Mr. O. King and .65% of
annual net income for Mr. Sapp.
Long-term Incentive Program:
Stock options are the basis for the Company's long-term incentive program.
The Company's stock option grants generally are made at market value at the date
of grant and vest over a five year period. This program links officer
compensation to long-term shareholder value and focuses management attention on
Company performance over a period longer than one year. Stock options are also
granted to encourage and facilitate personal stock ownership by the officers and
thus strengthen their personal commitment to the Company and lengthen their
perspective. The Committee's policy is to grant stock option awards annually,
based both upon individual performance and the potential for the officer to
contribute to the future success of the Company.
The Committee believes that the three programs described above provide
compensation that is competitive with the levels paid by major competitors in
the industry; effectively links officer and shareholder interests through
equity-based plans; and is structured to provide incentives that are consistent
with the long-term investment horizons which characterize the business in which
the Company is engaged. In this regard, the Committee draws shareholder
attention to the Total Annual Compensation for Messrs. O. King and Sapp, CEO and
COO, respectively, for the last several years during which their Total Annual
Compensation generally followed overall Company performance.
Chief Executive Officer Compensation:
In determining Mr. King's base salary, annual bonus, and stock option grant
in fiscal year 1997, the Committee considered the Company's overall performance
and Mr. King's individual performance by the same methods described above for
Company officer compensation. The Committee also considered compensation granted
to chief executive officers of other companies in similar industries, as well as
incentives for future performance.
The Committee believes that Mr. King's total compensation as Chief Executive
Officer appropriately reflects his performance and, in turn, that of the Company
in fiscal year 1997. Company results and Mr. King's individual performance
during the year continued to be excellent. For example in 1997, the Company
again had record revenues, record net income, record new orders received, and
finished the year with record order backlog.
The Committee does not believe that the compensation of any Company officer
is likely to exceed the nonperformance based $1 million threshold limit of
Section 162 (m) of the Internal Revenue Code.
Submitted by the Compensation Committee of the Company's Board of Directors:
Howard H. Callaway, Chairman
G. Robert Tod Jackie M. Ward
<PAGE>
Performance Graph
The following graph sets forth a comparison of the cumulative total Company
shareholder return with those of the Dow Jones Industrial Average ("DJIA") and
the Computer Hardware Subsector of the Hambrecht & Quist Technology Index ("H&Q
Comp Hdw"). Total shareholder return was determined by converting the closing
price of a share of SCI Common Stock ("SCI") at the beginning of the measurement
period (June 30, 1992) to a base amount ($100.00). Cumulative return for each
subsequent quarter-end (assuming reinvestment of all dividends into additional
shares) was measured as a change from the closing price at the beginning of the
measurement period and plotted. The graph assumes $100.00 was invested on June
30, 1992, in the Company's Common Stock, in the DJIA, and in the H&Q Comp Hdw
companies.
Comparative Five-Year Total Returns
SCI Systems, Inc., Dow Jones Industrial Average, and Hambrecht &
Quist ComputerHardware Subsector
(Normalized) Stock Performance Graph
[GRAPHIC OMITTED]
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors, and persons who own more than ten percent of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the
New York Stock Exchange and to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on transactions reported to the Company and review of the copies
of such forms and any amendments thereto furnished to the Company, or written
representations that no forms were required, the Company believes that during
the year ended June 30, 1997, all Section 16(a) filing requirements applicable
to its officers, directors and greater than ten percent beneficial owners were
met.
GENERAL
Any shareholder of the Company wishing to submit a proposal at the Company's
1998 annual meeting of shareholders and desiring the proposal be considered for
inclusion in the Company's proxy materials should provide a written copy of the
proposal to the management of the Company at its principal executive office,
attention Secretary, not later than May XX, 1998, and should otherwise comply
with the rules of the Securities and Exchange Commission relating to shareholder
proposals.
The cost of preparing and mailing the proxies, accompanying notices and Proxy
Statements, and all costs in connection with solicitation of proxies will be
paid by the Company. In addition to solicitation by use of the mail, certain
directors, officers and regular employees of the Company may solicit the return
of proxies by telephone, telegram or other electronic methods, or personal
interview without additional compensation. The Company has also retained D.F.
King & Co., Inc. to provide routine advice and services for proxy solicitation
for a fee of $1,000. The Company may request brokerage houses and custodians,
nominees, and fiduciaries to forward soliciting material to their principals,
the beneficial owners of Common Stock of the Company, and will reimburse them
for their reasonable out-of-pocket expenses.
Management does not know of any other matters to be presented at the Meeting
for action by shareholders. However, if any other matters requiring a vote of
the shareholders arise at the Meeting, it is intended that votes will be cast
pursuant to the proxies with respect to such matters in accordance with the best
judgment of the persons acting under the proxies.
If you cannot be present in person, you are requested to please date, sign
and mail the enclosed proxy card promptly. An envelope has been provided for
that purpose. No postage is required if mailed in the U.S.
By Order of the Board of Directors.
[GRAPHIC OMITTED]
-------------------------------------
Michael M. Sullivan
Secretary
Huntsville, Alabama
September XX, 1997
<PAGE>
PLEASE DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
This Proxy, when properly executed, will be voted in accordance with the
directions given by the undersigned shareholder. If no direction is made, it
will be voted in favor of Proposals 1, 2, and 3 and will be voted on any
discretionary matters in accordance with the best judgement and discretion of
the Proxies.
Dated:_______________________ , 1997
Signature_________________________
--------------------------------
Additional Signature, if held jointly
Please sign exactly as your name(s) appears hereon. If your shares are held
jointly, each shareholder named should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title as such. If the
signatory is a corporation, please sign the full corporate name by a duly
authorized officer.
SCI SYSTEMS, INC.
This Proxy is solicited on behalf of the Board of Directors of the Company
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement, each dated September XX, 1997, and does
hereby appoint Olin B. King and A. Eugene Sapp, Jr., and either of them, with
full power of substitution, as proxy or proxies of the undersigned to represent
the undersigned and to vote all shares of SCI Systems, Inc. Common Stock (par
value $0.10) which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of SCI Systems, Inc. to be held at
the Company's Facility located at 702 Bandley Drive, Fountain, Colorado 80817 at
10:00 a.m., Mountain Time, on October 24, 1997, and at any adjournment or
postponement thereof, upon the following matters as specified:
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ITS NOMINEES AND
THE FOLLOWING PROPOSALS.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1. Election of Class I Directors
FOR all nominees listed below (except as marked to the contrary below) WITHHOLD AUTHORITY to vote for all nominees
listed below
Olin B. King Howard H. Callaway
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write that nominee's name in the space provided below.)
2. Approval of Amendment of the Company's Second Restated Certificate of Incorporation to increase the numbers of shares of the
Company's authorized Common Stock (par value $0.10) from 100 million to 200 million shares.
FOR AGAINST ABSTAIN
3. Ratification of the selection of Ernst & Young LLP as the Company's auditors for the fiscal year ending June 30, 1998.
FOR AGAINST ABSTAIN
4. In their discretion, the Proxies are authorized to vote on such other business as may properly come before the
meeting or any adjournment or postponement thereof.
This Proxy may be revoked at any time prior to the voting thereof.
PLEASE DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENVELOPE ENCLOSED
</TABLE>
