<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-95297
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS PRELIMINARY
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO
SELL THESE SECURITIES AND ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 3, 2000
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 8, 2000)
$400,000,000
(SCI LOGO)
SCI SYSTEMS, INC.
% Convertible Subordinated Notes due , 2007
------------------
We are offering $400,000,000 principal amount of % Convertible
Subordinated Notes due 2007. Interest on the notes is payable on
and of each year, beginning on , 2000. Interest on
the notes will accrue from March , 2000. You can convert the notes into shares
of our common stock at a conversion price of $ per share (subject to adjustment
in certain events). The notes are expected to be listed on the New York Stock
Exchange under the symbol "SCI07." Our common stock is listed on the New York
Stock Exchange under the symbol "SCI" and the last reported price of the common
stock on March 2, 2000 was $47 15/16.
Historical statistics in this prospectus supplement relating to stock
prices and numbers of shares outstanding have been adjusted to retroactively
reflect all stock splits effected by SCI, including the 2-for-1 stock split in
the form of a stock dividend we paid on our common stock on February 18, 2000.
We may redeem some or all of the notes on or after March , 2003 under the
circumstances and at the prices described in this prospectus supplement. Under
certain circumstances, holders of notes will have the right to require us to
repurchase notes at the prices described in this prospectus supplement.
The notes will be unsecured obligations of SCI and will be subordinated in
right of payment to all of our Senior Indebtedness (as defined in the
accompanying prospectus). The notes will be structurally subordinated to the
liabilities of our subsidiaries.
INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE S-7 OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE 9 IN THE ACCOMPANYING
PROSPECTUS.
------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or passed upon the
accuracy or adequacy of this prospectus supplement or the accompanying
prospectus. Any representation to the contrary is a criminal offense.
------------------
<TABLE>
<CAPTION>
PER NOTE TOTAL
-------- ---------------
<S> <C> <C>
Public offering price(1).................................... $ $
Underwriting discount....................................... $ $
Proceeds to SCI (before expenses)........................... $ $
</TABLE>
- ---------------
(1) Plus accrued interest from , 2000, if settlement occurs after that
date.
------------------
We have granted the underwriters a 30-day option to purchase from us up to
an aggregate of $60,000,000 principal amount of additional notes to cover
over-allotments, if any.
The underwriters are offering the notes subject to various conditions. The
underwriters expect to deliver the notes to purchasers on or about
, 2000.
------------------
SALOMON SMITH BARNEY BANC OF AMERICA SECURITIES LLC
, 2000.
<PAGE> 2
YOU SHOULD READ THIS PROSPECTUS SUPPLEMENT TOGETHER WITH THE ACCOMPANYING
PROSPECTUS. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFERING OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF THIS PROSPECTUS SUPPLEMENT.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Forward-Looking Statements.................................. S-2
Summary..................................................... S-3
Risk Factors................................................ S-7
Use of Proceeds............................................. S-9
Price Range of Common Stock and Dividends................... S-9
Capitalization.............................................. S-10
Description of Notes........................................ S-11
Certain Federal Income Tax Considerations................... S-22
Underwriting................................................ S-24
Legal Matters............................................... S-25
PROSPECTUS
About this Prospectus....................................... 3
Forward-Looking Statements.................................. 3
SCI Systems, Inc............................................ 3
Risk Factors................................................ 9
Use of Proceeds............................................. 13
Consolidated Ratio of Earnings to Fixed Charges............. 13
The Securities.............................................. 13
Legal Ownership of Securities............................... 14
Description of Debt Securities.............................. 18
Description of Capital Stock................................ 34
Description of Depositary Shares............................ 35
Description of Warrants..................................... 38
Plan of Distribution........................................ 40
Legal Matters............................................... 41
Experts..................................................... 41
Where You Can Find Additional Information................... 41
Incorporation of Certain Documents by Reference............. 42
</TABLE>
FORWARD-LOOKING STATEMENTS
We make "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, throughout this prospectus supplement, the
accompanying prospectus and in the documents we incorporate by reference. You
can identify these statements by forward-looking words such as "may," "will,"
"expect," "anticipate," "believe," "estimate," "plan" and "continue" or similar
words. We have based these statements on our current expectations about future
events. Although we believe that our expectations reflected in or suggested by
our forward-looking statements are reasonable, we cannot assure you that these
expectations will be achieved. Our actual results may differ materially from
what we currently expect. Important factors which could cause our actual results
to differ materially from the forward-looking statements in this prospectus
supplement, in the accompanying prospectus or in the documents that we
incorporate by reference are set forth in the "Risk Factors" section of this
prospectus supplement, the "Risk Factors" section of the accompanying prospectus
and elsewhere in this prospectus supplement and the accompanying prospectus and
in the documents that we incorporate by reference.
You should read this prospectus supplement, the accompanying prospectus and
the documents that we incorporate by reference completely and with the
understanding that our actual future results may be materially different from
what we expect. We may not update these forward-looking statements, even in the
event our situation changes in the future. All written or oral forward-looking
statements attributable to us are expressly qualified by these cautionary
statements.
S-2
<PAGE> 3
SUMMARY
This summary highlights information contained elsewhere or incorporated by
reference in this prospectus supplement and the accompanying prospectus. This is
not intended to be a complete description of the matters covered and is subject
to and qualified in its entirety by reference to the more detailed information
and financial statements (including the notes thereto) appearing elsewhere or
incorporated by reference in this prospectus supplement and the accompanying
prospectus. As used in this prospectus supplement and the accompanying
prospectus, the terms "SCI," "we," "our," "us" and the "Company" refer to SCI
Systems, Inc. and its consolidated subsidiaries, unless the context requires
otherwise.
SCI SYSTEMS, INC.
We are a diversified international electronics manufacturing services
provider. We design, manufacture, distribute and service electronic products for
virtually every market segment. Markets served by SCI include the computer,
peripheral, datacom, telecom, medical, industrial, consumer, aerospace, defense,
and entertainment industries, as well as the United States Government.
In the mid-1970s, we pioneered the electronic contract manufacturing
services industry, which encompasses a full range of outsourcing services to
Original Equipment Manufacturers (OEMs) for the production and assembly of
electronic products, including engineering, procurement and inventory
management, testing, distribution and depot repair services. We became the
world's premier provider of electronics manufacturing services and we continue
as a leader in surface mount technology (SMT) production capacity.
Although we derive much of our revenue from hardware manufacturing and
maintain a broad technology base, we are primarily a vertically integrated
engineering and manufacturing services provider with dedication to close
customer interaction forming the cornerstone of our activities. The key elements
of our operating philosophy -- quality products, competitive pricing, and
customer responsiveness -- are a proven foundation for success. These
fundamental tenets will continue to guide us as we pursue opportunities for
growth and expansion.
Our customers include many of the foremost global OEMs that require
electronic manufacturing services, such as Hewlett-Packard, Compaq, Dell,
Nortel, Nokia, Ericsson, Philips, Cabletron, General Electric, Roche, Johnson &
Johnson, Boeing, Houston Tracker, Intel, ADM, LSI Logic, and McData.
We currently have 37 facilities in 17 different countries. We believe we
produce the broadest range of subassemblies and finished products of any
electronic manufacturing services company. These products and a full range of
engineering, distribution, logistic, and after sales services are supplied to a
large multinational customer base for a highly diversified mix of commercial
applications as well as for military and space programs.
Our principal executive offices are located at 2101 West Clinton Avenue,
Huntsville, Alabama, 35805, and our telephone number is (256) 882-4800. Our
website is located at www.sci.com. Information contained in our website is not a
part of this prospectus supplement, the accompanying prospectus or the documents
incorporated by reference.
For a more complete description of our business, see "SCI Systems, Inc." in
the accompanying prospectus.
RECENT DEVELOPMENTS
In August 1999, we acquired Nortel Network Corp.'s Brockville, Ontario,
Canada, plant and certain other manufacturing assets. This plant supplies
optical network subassemblies to Nortel Network Corp., with whom we have entered
into a multiyear manufacturing agreement. In December 1999, we purchased the
manufacturing assets of TAG Manufacturing, Inc., which makes fabricated sheet
metal products and assemblies (generally referred to as enclosures) for
computing, networking, communications and medical electronic equipment
applications. Since the beginning of our current quarter on December 27, 1999,
we
S-3
<PAGE> 4
have purchased ECI Telecom Ltd.'s Shemer manufacturing plant (which is located
in Israel and provides printed circuit boards to ECI Telecom Ltd. for use in
telecommunications products pursuant to a multiyear supply agreement) and have
purchased an equity interest in Uniwill Computer Corporation, a Taiwanese
notebook computer manufacturer.
On February 9, 2000, we filed our Quarterly Report on Form 10-Q for the
quarter ended December 26, 1999. You may obtain a copy of that filing without
charge by following the instructions set forth under "Incorporation of Certain
Documents by Reference" in the accompanying prospectus.
We effected a 2-for-1 stock split in the form of a stock dividend paid on
our common stock on February 18, 2000. Historical statistics in this prospectus
supplement relating to stock prices and numbers of shares outstanding have been
adjusted to retroactively reflect all stock splits effected by SCI, including
that effected on February 18, 2000.
THE OFFERING
The following is a brief summary of certain terms of this offering. For a
more complete description of the terms of the notes, see "Description of Notes"
herein and "Description of the Securities" in the accompanying prospectus.
ISSUER..................... SCI Systems, Inc.
SECURITIES OFFERED......... $400,000,000 principal amount of % Convertible
Subordinated Notes due 2007. We also have granted
the underwriters an over-allotment option to
purchase $60,000,000 principal amount of additional
notes.
MATURITY................... , 2007, unless earlier redeemed,
repurchased or converted.
INTEREST PAYMENT DATES..... and of each year,
commencing on , 2000.
CONVERSION................. The notes are convertible, unless previously
redeemed or repurchased, at the option of the
holder at any time prior to maturity, into shares
of our common stock at a conversion price of
$ per share, subject to adjustment in certain
events. See "Description of Notes -- Conversion."
The right to convert notes that have been called
for redemption will terminate at the close of
business on the business day immediately preceding
the date of redemption.
OPTIONAL REDEMPTION........ On or after , 2003 at any time or
from time to time, the notes may be redeemed at our
option, in whole or in part, in cash at the
redemption prices set forth herein, plus accrued
and unpaid interest to the date of redemption. See
"Description of Notes -- Optional Redemption."
MANDATORY REDEMPTION....... None
REPURCHASE AT THE OPTION OF
HOLDERS UPON DESIGNATED
EVENT.................... Upon a designated event (as defined below), holders
of the notes will have the right, subject to
certain restrictions and conditions, to require us
to purchase all or any part of their notes at a
purchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest to
the date of the purchase. See "Description of
Notes -- Repurchase at the Option of Holders" and
"Risk Factors -- Our
S-4
<PAGE> 5
Ability to Repurchase Notes if a Designated Event
Occurs is Limited."
RANKING.................... The notes are general unsecured obligations of SCI
and are subordinated in right of payment to all our
existing and future Senior Indebtedness (as defined
in the accompanying prospectus under the heading
"Description of Debt Securities -- Subordination of
Subordinated Debt Securities") to the extent set
forth in the indenture. The notes are also
effectively subordinated to all existing and future
indebtedness and other liabilities of any of our
current or future subsidiaries. The indenture does
not limit the amount of other indebtedness or
liabilities that we or our subsidiaries may incur
or securities that we or our subsidiaries may
issue. You should read the information under the
headings "Risk Factors -- The Notes are
Subordinated to Our Senior Indebtedness and All the
Obligations of Our Subsidiaries" and "Risk
Factors -- Our Ability to Repurchase Notes if a
Designated Event Occurs is Limited" and in the
accompanying prospectus under the heading
"Description of Debt Securities -- Subordination of
Subordinated Debt Securities" for more information
on the subordination of the notes.
USE OF PROCEEDS............ We estimate that we will receive net proceeds from
the offering of approximately $391 million
(assuming no exercise of the over-allotment). We
expect to apply approximately $300 million of the
proceeds to the repayment of amounts outstanding
under our revolving line of credit and
approximately $91 million of the proceeds to the
repayment of amounts owed under our commercial
paper facility. See "Use of Proceeds."
TRADING.................... The notes are expected to be listed on the New York
Stock Exchange under the symbol "SCI07." Our common
stock is listed on the New York Stock Exchange
under the symbol "SCI."
S-5
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------- YEAR ENDED JUNE 30,
DECEMBER 26, DECEMBER 27, -----------------------------------------------------------------
1999 1998 1999 1998 1997 1996 1995
------------ ------------ ------------ ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $3,819,373 $3,305,507 $6,710,785 $6,805,893 $5,762,656 $4,544,759 $2,673,783
Costs and expenses,
including goodwill
amortization........... 3,676,943 3,195,867 6,475,983 6,548,792 5,556,480 4,385,284 2,582,739
Operating income......... 142,430 109,640 234,802 257,101 206,176 159,475 91,044
Interest expense, net of
interest income........ 8,331 10,027 16,938 21,304 17,993 24,165 16,945
Other income (expense),
net.................... 238 (206) (781) 114 1,251 748 1,562
Taxes on income(1)....... 44,331 36,781 79,235 90,826 76,721 55,103 30,418
Net income............... 90,006 62,626 137,848 145,085 112,713 80,955 45,243
Depreciation and
amortization........... 66,380 56,128 123,905 103,534 76,848 60,972 49,839
EBITDA(2)................ 208,810 165,768 358,707 360,635 283,024 220,447 140,883
Ratio of earnings to
fixed charges(3)....... 12.66X 8.33X 10.02X 8.70X 7.20X 6.25X 5.11X
Earnings per share(4)(5)
Basic.................. $ 0.63 $ 0.52 $ 1.11 $ 1.21 $ 0.95 $ 0.69 $ 0.41
Diluted................ 0.62 0.46 1.00 1.06 0.84 0.67 0.40
Weighted average number
of shares used in
computation(4)(5)
Basic.................. 143,986,726(6) 119,946,964 124,071,098(6) 119,721,188 118,990,896 117,869,436 109,338,216
Diluted................ 146,196,601 145,086,690 145,224,528 145,155,664 144,297,328 123,967,640 117,860,200
</TABLE>
- ---------------
(1) U.S. income taxes in excess of estimated foreign income tax credits have not
been provided on certain undistributed earnings of foreign subsidiaries,
aggregating $83 million at December 26, 1999, which are considered to be
permanently invested. Otherwise, approximately $20 million of cumulative
deferred income taxes (net of related estimated foreign income tax credits)
would have been provided.
(2) EBITDA represents net sales minus costs and expenses, including goodwill
amortization, plus depreciation and amortization as presented on our
statements of cash flow. EBITDA is presented because it is a widely accepted
financial indicator; however, EBITDA may not be comparable to other
registrants' calculation of EBITDA or similarly titled items. You should not
consider EBITDA as an alternative to net income as a measure of operating
results in accordance with generally accepted accounting principles or as an
alternative to cash flows as a measure of liquidity.
(3) Ratio of earnings to fixed charges was calculated by dividing income before
income taxes and interest and debt amortization expense by interest and debt
amortization expense.
(4) Number of shares and per share data have been adjusted retroactively to
reflect all stock splits effected by SCI, including the 2-for-1 stock split
effected in the form of a stock dividend on our common stock paid on
February 18, 2000.
(5) Basic earnings per share are computed by dividing reported net income for
the period by the weighted average number of shares outstanding during the
period. Reconciliations of the net income and weighted average number of
shares used for the diluted earnings per share computations are included in
Note F to the Condensed Consolidated Financial Statements contained in our
Quarterly Report on Form 10-Q for the quarter ended December 26, 1999 and in
Note C to the Consolidated Financial Statements contained in our 1999 Annual
Report to Shareholders.
(6) In May 1999, substantially all of our outstanding 5% Convertible
Subordinated Notes due May 1, 2006 were converted, resulting in the issuance
of 23,584,686 shares of our common stock.
S-6
<PAGE> 7
RISK FACTORS
Before you invest in the notes, you should be aware that the occurrence of
any of the events described in this section and elsewhere in this prospectus
supplement or in the "Risk Factors" section of, or elsewhere in, the
accompanying prospectus could have a material adverse effect on our business,
financial condition and results of operation. You should carefully consider
these risk factors, together with all of the other information included in this
prospectus supplement, in the accompanying prospectus and in the documents we
incorporate by reference before you decide to purchase the notes. You may obtain
the documents incorporated by reference into the accompanying prospectus without
charge by following the instructions set forth under "Incorporation of Certain
Documents by Reference" in the accompanying prospectus.
THE NOTES ARE SUBORDINATED TO OUR SENIOR INDEBTEDNESS AND ALL THE OBLIGATIONS OF
OUR SUBSIDIARIES.
The notes will be unsecured and subordinated in right of payment to all of
our existing and future Senior Indebtedness (as defined in the accompanying
prospectus). As a result of such subordination, in the event of our bankruptcy,
liquidation or reorganization or upon acceleration of the notes due to an event
of default (as defined in the accompanying prospectus) under the indenture
pursuant to which the notes are issued and in certain other events, our assets
will be available to pay obligations on the notes only after all Senior
Indebtedness has been paid, and there may not be sufficient assets remaining to
pay amounts due on any or all of the notes then outstanding. The notes also will
be effectively subordinated to the liabilities, including trade payables, of our
subsidiaries. The indenture pursuant to which the notes are issued does not
prohibit or limit the incurrence of Senior Indebtedness or the incurrence of
other indebtedness and other liabilities by us or any subsidiary. The incurrence
of additional indebtedness and other liabilities by us or our subsidiaries could
adversely affect our ability to pay our obligations on the notes. As of January
23, 2000, we had approximately $564 million of indebtedness outstanding that
would constitute Senior Indebtedness and our subsidiaries had approximately $1.3
billion of outstanding indebtedness and other liabilities, including (and
consisting primarily of) trade payables and excluding intercompany liabilities
and amounts included in Senior Indebtedness. The notes are effectively
subordinated to such subsidiary indebtedness and other liabilities. You should
read the information under the heading "-- Our Ability to Repurchase Notes if a
Designated Event Occurs is Limited" and in the accompanying prospectus under the
heading "Description of Debt Securities -- Subordination of Subordinated Debt
Securities" for more information on the subordination of the notes.
OUR ABILITY TO REPURCHASE NOTES IF A DESIGNATED EVENT OCCURS IS LIMITED.
Our ability to repurchase notes upon the occurrence of a designated event
(as defined below) is subject to limitations. The occurrence of certain of the
events which would constitute a designated event would trigger an event of
default under certain of our credit agreements entitling the lenders thereunder
to accelerate the debt. If a designated event were to occur (following any such
acceleration or otherwise) we may not have sufficient financial resources, or we
may be unable to arrange financing, to pay the repurchase price for all notes
tendered. Our subsidiaries may be parties in the future to credit agreements and
other agreements relating to indebtedness which contain restrictions on
transferring funds sufficient to permit us to effect a designated event payment.
In addition, future credit agreements or other agreements relating to our
indebtedness (including additional Senior Indebtedness) may contain prohibitions
or restrictions on our 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, we could seek the consent of our lenders and lenders to our
subsidiaries to enable us to purchase notes or could attempt to refinance the
borrowings that contain such prohibitions or restrictions. If we do not obtain
such consents or repay such borrowings, we will be effectively prohibited from
purchasing notes. In such case, our 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 our Senior Indebtedness. As a
result, in such a 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.
S-7
<PAGE> 8
You should read the information under the heading "-- The Notes are Subordinated
to our Senior Indebtedness and All the Obligations of our Subsidiaries" and in
the accompanying prospectus under the heading "Description of Debt
Securities -- Subordination of Subordinated Debt Securities" for more
information on the subordination of the notes.
THERE IS NO PUBLIC MARKET FOR THE NOTES.
Although the notes are expected to be listed on the New York Stock Exchange
under the symbol "SCI07" we cannot assure you that any market for the notes will
develop, or if one does develop, that it will be maintained. If an active market
for the notes fails to develop or be sustained, the price and liquidity of the
notes could be adversely affected.
THE PRICE OF OUR NOTES AND OUR COMMON STOCK MAY BE VOLATILE.
The trading price of our common stock has been and could in the future be
subject to significant fluctuations in response to variations in quarterly
operating results, developments in the electronic manufacturing services
industry, general economic conditions, changes in securities analysts'
recommendations regarding our securities and other factors. These broad market
fluctuations may harm the market price of the notes and the common stock into
which the notes are convertible.
S-8
<PAGE> 9
USE OF PROCEEDS
We estimate that we will receive net proceeds from the offering of
approximately $391 million (assuming no exercise of the over-allotment). We
expect to apply approximately $300 million of the proceeds to the repayment of
amounts outstanding under our revolving line of credit and approximately $91
million of the proceeds to the repayment of amounts owed under our commercial
paper facility. The interest rates on borrowings under the line of credit are
varying rates based upon LIBOR. Amounts outstanding under the commercial paper
facility bear interest at varying market rates depending on maturity. At January
23, 2000, the weighted average interest rate per annum on the line of credit was
6.41% and on the commercial paper facility was 6.02%. We used the proceeds from
these facilities for working capital and to fund acquisitions.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is listed on the New York Stock Exchange under the symbol
"SCI." The following table sets forth the low and high sales prices of the
common stock for the fiscal quarters indicated as reported on the New York Stock
Exchange Composite Tape and retroactively reflects all stock splits effected by
SCI, including the 2-for-1 stock split in the form of a stock dividend paid on
February 18, 2000.
<TABLE>
<CAPTION>
LOW HIGH
--- ----
<S> <C> <C>
Fiscal Year ended June 30, 1998:
Third Quarter............................................. $17 25/32 $24 1/2
Fourth Quarter............................................ $15 1/8 $22 13/32
Fiscal Year ended June 30, 1999:
First Quarter............................................. $10 5/8 $22 1/4
Second Quarter............................................ $10 3/8 $28 31/32
Third Quarter............................................. $14 19/32 $29 11/16
Fourth Quarter............................................ $12 5/8 $25
Fiscal Year ending June 30, 2000:
First Quarter............................................. $22 1/32 $27 29/32
Second Quarter............................................ $20 3/32 $42 3/4
Third Quarter (through March 2, 2000)..................... $34 3/4 $47 15/16
</TABLE>
On March 2, 2000, the closing price of our common stock as reported on the
New York Stock Exchange was $47 15/16. As of March 2, 2000, there were
approximately 1,827 holders of record of shares of our common stock.
We do not currently pay dividends on our common stock and do not anticipate
paying dividends on our common stock in the foreseeable future.
S-9
<PAGE> 10
CAPITALIZATION
The following table sets forth our capitalization as of January 23, 2000,
and as adjusted to give effect to the receipt and anticipated application of the
gross proceeds (before deducting underwriting discounts and offering expenses)
from the offering. The following information should be read in conjunction with
our consolidated financial statements and related notes incorporated by
reference in the accompanying prospectus.
<TABLE>
<CAPTION>
AS OF JANUARY 23, 2000
----------------------------
ACTUAL AS ADJUSTED(1)
---------- --------------
(IN THOUSANDS)
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses..................... $1,244,554 $1,244,554
Accrued payroll and related expenses...................... 42,601 42,601
Federal, foreign and state income taxes................... 23,855 23,855
Current maturities of long-term debt...................... 1,866 1,866
---------- ----------
Total Current Liabilities......................... 1,312,876 1,312,876
Deferred Income Taxes....................................... 38,612 38,612
Noncurrent Employee Benefits................................ 38,632 38,632
Long-term Debt:
Industrial revenue bonds.................................. 19,857 19,857
Long-term notes........................................... 515,029 115,029
% Convertible Subordinated Notes offered hereby... 0 400,000
---------- ----------
Total Long-term Debt.............................. 534,886 534,886
Minority interest........................................... 530 530
Shareholders' Equity(2):
Preferred stock, 500,000 shares authorized but unissued... 0 0
Common stock, $.10 par value: authorized 200,000,000;
issued 144,717,818(3).................................. 14,475 14,475
Capital in excess of par value............................ 470,199 470,199
Retained earnings......................................... 801,681 801,681
Currency translation adjustment........................... (12,689) (12,689)
Treasury stock and shares held in Rabbi trusts at cost.... (4,633) (4,633)
---------- ----------
Total Shareholders' Equity........................ 1,269,033 1,269,033
---------- ----------
Total Liabilities and Shareholders' Equity... $3,194,569 $3,194,569
========== ==========
</TABLE>
- ---------------
(1) As adjusted for the gross proceeds of the offering, before payment of debt
issuance costs (underwriting discounts and offering expenses), which are
estimated to be approximately $
million. Does not include notes issuable upon the exercise of the
underwriters' over-allotment option. If the over-allotment option is
exercised in full, " % Convertible Subordinated Notes offered hereby",
"Total Long-term Debt" and "Total Liabilities and Shareholders' Equity"
would be $460,000,000, $594,886,000 and $3,254,569,000, respectively.
(2) Numbers of shares and dollar amounts in both columns have been adjusted to
retroactively reflect the 2-for-1 stock split effected in the form of a
stock dividend paid on our common stock on February 18, 2000.
(3) Does not include 7,680,880 shares (as adjusted retroactively to reflect the
2-for-1 stock split discussed in Note 2 above) of common stock issuable upon
exercise of stock options granted and outstanding at January 23, 2000, at a
weighted-average price of $16.32 per share.
S-10
<PAGE> 11
DESCRIPTION OF NOTES
The following description of the particular terms of the notes offered in
this offering supplements the description of debt securities under the headings
"Description of Debt Securities" and "Legal Ownership of Securities" in the
accompanying prospectus and, to the extent inconsistent, supersedes that
description.
We will issue the notes under a subordinated indenture to be dated as of
March , 2000 between SCI and Bank One Trust Company, National Association, as
trustee, as supplemented by the supplemental indenture to be dated as of March
, 2000. When we refer to the indenture in this prospectus supplement, we are
referring to the subordinated indenture as supplemented by the supplemental
indenture. The following summarizes some, but not all, of the provisions of the
notes, the subordinated indenture and the supplemental indenture. Although we
believe that we have summarized the material terms of the indenture, this
summary is not complete and is qualified in its entirety by reference to the
indenture. You may obtain a copy of the proposed form of the indenture without
charge by following the instructions set forth under "Incorporation of Certain
Documents by Reference" in the accompanying prospectus.
GENERAL
The notes are general unsecured obligations of SCI and are subordinated in
right of payment to all our existing and future Senior Indebtedness (as defined
in the accompanying prospectus under the heading "Description of Debt
Securities -- Subordination of Subordinated Debt Securities") to the extent set
forth in the indenture. The notes are also effectively subordinated to all
existing and future indebtedness and other liabilities of any of our current or
future subsidiaries. The indenture does not limit the amount of other
indebtedness or liabilities that we or our subsidiaries may incur or securities
that we or our subsidiaries may issue. You should read the information under the
headings "Risk Factors -- The Notes are Subordinated to our Senior Indebtedness
and All the Obligations of Our Subsidiaries" and "Risk Factors -- Our Ability to
Repurchase Notes if a Designated Event Occurs is Limited" and in the
accompanying prospectus under the heading "Description of Debt
Securities -- Subordination of Subordinated Debt Securities" for more
information on the subordination of the notes.
PRINCIPAL, MATURITY AND INTEREST
The notes will be limited in aggregate principal amount to $400,000,000
(plus up to an additional $60,000,000 aggregate principal amount which the
underwriters have the option to purchase to cover over-allotments, if any). The
notes bear interest from March , 2000 at % per annum and mature on March
, 2007.
We pay interest on the notes semiannually on
and of each year commencing on
, 2000, to holders of record at the close of business on the
or immediately
preceding the interest payment dates. We compute interest on the basis of a
360-day year consisting of twelve 30-day months. Interest on the notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from , 2000. We will issue the
notes in registered form, without coupons, and in denominations of $1,000 and
integral multiples of $1,000.
If a payment date is not a business day at a place of payment, we may make
payment at that place on the next succeeding business day, and no interest will
accrue for the intervening period.
We have appointed the trustee, Bank One Trust Company, National
Association, at its corporate trust office in the Borough of Manhattan, The City
of New York as the registrar, paying agent and conversion agent. We may
terminate the appointment of the registrar, paying agent or conversion agent at
any time and appoint additional or other registrars, paying agents and
conversion agents. We will maintain an office or agency in the Borough of
Manhattan, The City of New York for payments with respect to the notes and for
the surrender of notes for conversion until the notes have been delivered to the
trustee for
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cancellation, or moneys sufficient to pay the principal of, and premium, if any,
and interest on the notes have been made available for payment and either paid
or returned to us as provided in the indenture. We will give notice of any
termination or appointment and of any change in the office through which the
paying agent or conversion agent will act in accordance with the procedures set
forth under the heading "-- Notices" below.
OPTIONAL REDEMPTION
We may not redeem the notes prior to March , 2003. On and after March ,
2003, we may redeem the notes at our option, in whole or from time to time in
part (in any integral multiple of $1,000), after giving not less than 30 days
nor more than 60 days prior notice by mail to the holders of the notes. We may
redeem the notes at the following redemption prices (expressed as percentages of
the principal amount), in each case together with accrued interest, if any, to,
but excluding, the redemption date, subject to the right of holders of record on
the relevant record date to receive interest, if any, due on an interest payment
date. If we redeem the notes during the 12-month period beginning
of the years indicated (
, in the case of 200 ) the redemption price shall be:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003 %
2004 %
2005 %
2006 %
</TABLE>
On or after the redemption date, interest will cease to accrue on the notes, or
portions thereof, called for redemption unless we shall fail to redeem the
notes.
MANDATORY REDEMPTION
We are 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 an event known as a "designated event" (which
includes a change of control or a termination of trading), each holder of notes
has the right to require us to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of the holder's notes pursuant to the offer described
below at a purchase price equal to 100% of the principal amount of the notes,
together with accrued and unpaid interest, if any, on the notes to the payment
date for the designated event.
Within 30 days following any designated event, unless we have previously
given the holders notice of our intention to redeem the notes in whole pursuant
to the provisions set forth under the heading "-- Optional Redemption" below, we
will mail a notice to each holder stating:
- that the designated event offer is being made pursuant to the covenant
described in this paragraph and that all notes validly tendered will be
accepted for payment;
- the purchase price and the purchase date, which shall be no earlier than
30 days nor later than 60 days following the date such notice is mailed
unless a later date is required by applicable law;
- that any notes not validly tendered or accepted for payment will continue
to accrue interest, and will continue to have conversion rights;
- that, unless we default in the payment of the designated event payment,
all notes accepted for payment pursuant to the designated event offer
will cease to accrue interest from and after the designated event payment
date and will cease to have conversion rights after the designated event
payment date;
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- 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 Noteholder to Elect Purchase" on the reverse of
the notes completed, to a 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;
- that any holder will be entitled to withdraw its election if the holder
delivers to the paying agent a 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 if the paying agent receives it no later
than the close of business on the second business day preceding the
designated event payment date;
- 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; and
- the instructions and any other information necessary to enable holders to
accept a designated event offer or effect withdrawal of such acceptance.
We will comply with the requirements of Rules 13e-4 and 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent these
laws and regulations apply to the repurchase of the notes in connection with a
designated event.
On the designated event payment date, we will, to the extent lawful:
- accept for payment notes or portions thereof validly tendered pursuant to
the designated event offer; and
- deposit with the trustee or a paying agent in immediately available funds
an amount equal to the designated event payment in respect of all notes
or portions of notes tendered.
We 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 us to 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 our company, and,
thus, the removal of the management of our company at that time. The designated
event purchase feature, however, is not the result of our knowledge of any
specific effort to accumulate our capital stock or to obtain control of us 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 us and the
underwriters of the notes. We have no current intention to engage in a
transaction involving a designated event, although it is possible that we could
decide to do so in the future.
Subject to the limitations on mergers, consolidations and sales of assets
described in the accompanying prospectus under the heading "Description of Debt
Securities -- Consolidation, Merger and Sale of Assets," we could, in the
future, enter into transactions, including acquisitions, refinancings or other
recapitalizations, that would not be a designated event under the indenture, but
that could increase the amount of indebtedness (including Senior Indebtedness)
outstanding at that time or otherwise affect our capital structure or credit
ratings. The payment of the designated event payment is subordinated to the
prior payment of Senior Indebtedness as described under the headings "Risk
Factors -- The Notes are Subordinated to our Senior Indebtedness and All the
Obligations of Our Subsidiaries" and "Risk Factors -- Our Ability to Repurchase
Notes if a Designated Event Occurs is Limited" and in the accompanying
prospectus under the heading "Description of Debt Securities -- Subordination of
Subordinated Debt Securities."
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Our ability to repurchase notes upon the occurrence of a designated event
may be limited. The occurrence of certain of the events which would constitute a
designated event would trigger an event of default under certain of our credit
agreements entitling the lenders thereunder to accelerate the debt. If a
designated event were to occur, we cannot assure you that (following any such
acceleration or otherwise) we would have sufficient financial resources, or
would be able to arrange financing, to pay the designated event payment for all
notes tendered by holders of the notes. Our subsidiaries may be parties in the
future to credit agreements and other agreements which restrict the transfer of
funds to our company that would be necessary to permit us to pay a designated
event payment. In addition, future credit agreements or other agreements may
prohibit or restrict our ability to pay a designated event payment. If a
designated event occurs at a time when prohibitions or restrictions are in
effect, we could seek the consent of appropriate third parties to enable us to
purchase notes or we could attempt to refinance any borrowings that contain
prohibitions or restrictions. If we do not obtain consents or repay these
borrowings, we will not be able to purchase notes. In this case, our failure to
purchase tendered notes would constitute an event of default under the indenture
whether or not the repurchase is permitted by the subordination provisions of
the indenture. Any default may, in turn, cause a default under our Senior
Indebtedness. Moreover, the occurrence of a designated event may cause an event
of default under, and permit acceleration of, Senior Indebtedness. You should
read the information under the headings "Risk Factors -- The Notes are
Subordinated to our Senior Indebtedness and All the Obligations of Our
Subsidiaries" and "Risk Factors -- Our Ability to Repurchase Notes if a
Designated Event Occurs is Limited" and in the accompanying prospectus under the
heading "Description of Debt Securities -- Subordination of Subordinated Debt
Securities" for more information on the subordination of the notes.
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:
- any "person" or "group" (as such terms are used in Sections 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 our
directors;
- we consolidate with or merge into any other person, or any other person
merges into us, and, in the case of any such transaction, our outstanding
common stock is reclassified into or exchanged for any other property or
securities, unless our stockholders immediately before such transaction
own, directly or indirectly immediately following such transaction, at
least a majority of the combined voting power of the then outstanding
voting securities entitled to vote generally in elections of directors of
the corporation resulting from such transaction in substantially the same
respective proportions as their ownership of our voting stock (as defined
in the accompanying prospectus) immediately before the transaction;
- our company and our subsidiaries, taken as a whole, sell, assign, convey,
transfer or lease all or substantially all of the assets of our company
or of our company and our subsidiaries, taken as a whole (other than to
one or more of our wholly-owned subsidiaries); or
- any time the continuing directors do not constitute a majority of our
board of directors (or, if applicable, a successor corporation to our
company);
provided, however, that:
- a change of control under the first three bullets above shall not be
deemed to have occurred if the daily market price per share of common
stock for any five trading days within the period of 10 consecutive
trading days ending immediately after the later of the change of control
or the public announcement of the change of control (in the case of a
change of control under the first bullet above) or the period of 10
consecutive trading days ending immediately before the change of control
(in the case of a change of control under the second and third bullets
above) shall equal or
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exceed 105% of the conversion price of the notes in effect on the date of
the change of control or the public announcement of the change of
control, as applicable; and
- a change of control under the first three bullets above shall not be
deemed to have occurred if at least 90% of the consideration in the
change of control transaction consists of shares of capital stock traded
on a United States national securities exchange or quoted on the NASDAQ
National Market, or other established automated over-the-counter trading
market in the United States, and as a result of the transaction, the
notes become convertible solely into this capital stock.
Note that the definition of change of control in the indenture includes a
phrase relating to the sale, assignment, conveyance, transfer or lease of "all
or substantially all" of the assets of our company or of our company and our
subsidiaries taken as a whole. There are only a limited number of court
decisions interpreting the phrase "substantially all" and, as a result, there is
no precise established definition of the phrase under applicable law.
Accordingly, your ability as a holder of notes to require us to repurchase your
notes as a result of a sale, assignment, conveyance, transfer or lease of less
than all of the assets of our company or our company and our subsidiaries, taken
as a whole, to another person or group may be uncertain.
The term "continuing directors" means, as of any date of determination, any
member of our board of directors who (i) was a member of our board of directors
on the date of the indenture or (ii) was nominated for election or elected to
our board of directors with the approval of a majority of the continuing
directors who were members of our board at the time of their nomination or
election.
A "termination of trading" will be deemed to have occurred if our common
stock (or other securities into which the notes are then convertible) is neither
listed for trading on a United States national securities exchange nor approved
for trading on The NASDAQ National Market or other established automated
over-the-counter trading market in the United States.
SELECTION AND NOTICE
If we are redeeming less than all of the notes, the trustee will select the
notes for redemption by complying with the requirements of the principal
national securities exchange, if any, on which the notes are listed, or, if the
notes are not listed, on a pro rata basis, by lot or by another method that the
trustee deems fair and appropriate. No notes of $1,000 in principal amount or
less will be redeemed in part. We will mail, or cause to be mailed, a notice of
redemption to each holder of notes to be redeemed at its registered address at
least 30 days but not more than 60 days before the redemption date. If we are
redeeming any note in part only, the notice of redemption that relates to the
note will state the portion of the principal amount of the note to be redeemed.
We will issue, or cause to be issued, a new note in principal amount equal to
the unredeemed portion of the note in the name of the holder of the note upon
cancellation of the original note. On and after the redemption date, interest
will cease to accrue on notes or portions of notes called for redemption unless
we default in the payment of the redemption price for the notes.
CONVERSION
The holder of any note has the right, exercisable at any time following the
issuance date and prior to the close of business on the business day immediately
preceding the maturity date of the notes, to convert the principal amount of its
notes (or any portion of its notes that is an integral multiple of $1,000) into
shares of common stock at the conversion price of $ per share, subject
to adjustment as described below. If we have called a note for redemption, the
conversion right will terminate at the close of business on the business day
immediately preceding the redemption date (unless we default in making the
redemption payment when it becomes due, in which case the conversion right shall
terminate on the date on which the default is cured). If the holder of any note
delivers notice of its election to have such note purchased pursuant to a
designated event offer, the note may be converted only if the notice of election
is withdrawn as described under the heading "Repurchase at Option of Holders"
above. Except as described below, we will not pay or adjust any notes upon
conversion for accrued and unpaid interest on the notes or
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for dividends or distributions on any common stock issued upon conversion of
notes. We will not issue fractional shares upon conversion. Instead, we will
make a cash adjustment for any fractional interest.
The owners of a note may exercise their right of conversion by delivering
to The Depository Trust Company, which is known as "DTC," the appropriate
instruction form for conversion pursuant to DTC's conversion program.
Pursuant to the indenture, the date on which all of the foregoing
requirements have been satisfied is the conversion date. The notice of
conversion can be obtained from the trustee at its corporate trust office or the
office of the conversion agent.
As promptly as practicable on or after the conversion date, we will issue
and deliver to the trustee a certificate or certificates for the number of full
shares of common stock issuable upon conversion, together with payment for any
fraction of a share in an amount determined on the basis of the daily market
price (as described below) of the common stock on the trading day prior to the
applicable conversion date. The trustee will send the certificate or
certificates to the conversion agent for delivery to the holder. The common
stock issuable upon conversion of the notes will be fully paid and
nonassessable. Holders of common stock issued upon conversion will not be
entitled to receive any dividends payable to holders of common stock as of any
record time before the close of business on the conversion date.
Any note surrendered for conversion during the period after the close of
business on any record date and before the opening of business on the next
succeeding interest payment date (except notes called for redemption on a
redemption date falling within this period or to be repurchased on a designated
event payment date falling within this period) must be accompanied by payment of
an amount equal to the interest payable on the interest payment date on the
principal amount of notes being surrendered for conversion. In the case of any
note which has been surrendered for conversion after the close of business on
any record date and before the opening of business on the next succeeding
interest payment date, interest on the note shall be payable on the interest
payment date notwithstanding the conversion of the note, and the interest will
be paid to the person who was the holder of the note at the close of business on
the record date. No other payment or adjustment for interest or for any
dividends in respect of common stock will be made upon conversion.
As a result of the procedures described in the foregoing paragraph:
- if you hold a note on a record date and surrender it for conversion on
the following interest payment date, you will receive all interest that
has accrued to such interest payment date;
- if you hold a note on a record date and that note
(a) is to be redeemed on a redemption date falling before the next
succeeding interest payment date or
(b) is to be repurchased on a designated event payment date falling
before the next succeeding interest payment date
and you surrender that note for conversion during the period after the
record date and before the related interest payment date, you will receive
all interest that accrues to the interest payment date (even though this
is subsequent to conversion of the note);
- if you surrender a note for conversion during the period after a record
date and before the next succeeding interest payment date, you will
effectively refund to SCI the interest payment that SCI is delivering to
the person that held those notes on the relevant record date (unless the
notes were called for redemption on a redemption date falling within this
period or were to be repurchased on a designated event payment date
falling within this period, as described in the preceding bullet point);
and
- if you surrender a note for conversion during the period after an
interest payment date and on or before the next succeeding record date,
you will not receive any payment for interest that has accrued on that
note at the time you convert.
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ADJUSTMENT OF CONVERSION PRICE
We will adjust the conversion price upon the occurrence of certain events,
including:
- the issuance of shares of common stock as a dividend or distribution on
the common stock;
- the subdivision or combination of common stock;
- the issuance to 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 (determined as set forth below);
- the distribution of shares of our capital stock (other than common
stock), evidences of indebtedness, cash, rights or warrants to subscribe
for or purchase securities (other than rights or warrants referred to in
the third bullet above) or other assets (including securities of persons
other than our company), but excluding:
(a) dividends or distributions paid exclusively in cash,
(b) dividends or distributions referred to in the first or second
bullets above, and
(c) distributions in connection with a consolidation, merger or transfer
of assets (covered in the second following paragraph) to all holders of
common stock;
- distributions, by dividend or otherwise, to all holders of common stock
exclusively in cash (excluding any cash that is distributed as part of a
distribution requiring a conversion price adjustment pursuant to the
fourth bullet above) in an aggregate amount that, together with the
aggregate of:
(a) any other all-cash distributions to all holders of common stock
within the 12 months preceding the date fixed for determining the
stockholders entitled to the distribution that did not trigger a
conversion price adjustment; and
(b) all excess payments in respect of each tender offer or other
negotiated transaction by our company or any of our subsidiaries for
common stock concluded within the 12 months preceding the date fixed for
determining the stockholders entitled to the distribution not triggering a
conversion price adjustment,
exceeds 15% of the product of the current market price per share on the
date fixed for determining the stockholders entitled to the distribution
times the number of shares of common stock outstanding on that date; or
- payment of an excess payment in respect of a tender offer or other
negotiated transaction consummated by our company or any of our
subsidiaries for common stock, if the aggregate amount of that excess
payment, together with the aggregate amount of:
(a) cash distributions made to all holders of common stock within the 12
months preceding the expiration of the tender offer or the date of payment
of the negotiated transaction consideration, as the case may be, not
triggering a conversion price adjustment; and
(b) all excess payments in respect of each other tender offer or other
negotiated transaction by our company or any of our subsidiaries for
common stock concluded within the 12 months preceding that date not
triggering a conversion price adjustment,
exceeds 15% of the product of the current market price per share on that
date times the number of shares of common stock outstanding on that date.
In the event of a distribution to all holders of common stock of rights to
subscribe for additional shares of our capital stock (other than those rights
and warrants referred to in the third bullet above), we may, instead of making
any adjustment in the conversion price, make proper provision so that each
holder of a note who converts the note after the record date for the
distribution and prior to the expiration or
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redemption of the rights shall be entitled to receive upon the conversion, in
addition to shares of common stock, an appropriate number of the rights. We will
not make an adjustment of the conversion price until cumulative adjustments
amount to one percent or more of the conversion price as last adjusted.
If we reclassify or change our outstanding common stock (other than changes
in par value or from par value to no par value or from no par value to par value
or resulting from a subdivision or a combination), or consolidate with or merge
into any person (other than a merger where our company is the continuing
corporation and which does not result in a reclassification or change in the
common stock other than a change in par value described above), or transfer all
or substantially all our assets (determined on a consolidated basis), 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 any
transaction if the holders had converted the notes immediately before the
transaction.
The indenture also provides that if rights, warrants or options expire
unexercised, we will readjust the conversion price to take into account the
actual number of such warrants, rights or options which were exercised.
In the indenture, the "daily market price" per share of common stock on any
date is deemed to be the price of a share of common stock on the relevant date,
determined
- on the basis of the last reported sale price regular way of the common
stock as reported on the New York Stock Exchange, or if the common stock
is not then listed on the New York Stock Exchange, as reported on the
principal national securities exchange upon which the common stock is
listed,
- if there is no such reported sale on the day in question, on the basis of
the average of the closing bid and asked quotations regular way as so
reported, or
- if the common stock is not listed on the New York Stock Exchange or on
any national securities exchange, on the basis of the average of the high
bid and low asked quotations regular way on the day in question in the
over-the-counter market as reported by the National Association of
Securities Dealers Automated Quotation System, or if not so quoted, as
reported by National Quotation Bureau, Incorporated, or a similar
organization.
In the indenture, the "current market price" per share of common stock on
any date is deemed to be the average of the daily market prices for the shorter
of:
- 30 consecutive business days ending on the last full trading day on the
exchange or market referred to in determining the daily market prices
prior to the time of determination; or
- the period commencing on the date next succeeding the first public
announcement of the issuance of rights or warrants or other distribution
or tender offer or other negotiated transaction through the last full
trading day on the exchange or market referred to in determining the
daily market prices prior to the time of determination.
An "excess payment" is the excess of (a) the aggregate of the cash and fair
market value (as determined by our board of directors, whose determination shall
be conclusive evidence of the fair market value) of other consideration paid by
our company or any of our subsidiaries with respect to the shares acquired in a
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.
To the extent permitted by law, we may from time to time reduce the
conversion price by any amount for any period of at least 20 days, in which case
we will give at least 15 days' notice of the reduction if our board of directors
has made a determination that the reduction would be in the best interests of
our company, which determination shall be conclusive. We may, at our option,
make reductions in the conversion price, in addition to those set forth above,
as our board of directors deems advisable to avoid or diminish any income tax to
holders of common stock resulting from any dividend or
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distribution of stock (or rights to acquire stock) or any event treated as a
dividend or distribution for federal income tax purposes. See "Certain Federal
Income Tax Considerations."
You may, in some circumstances, be deemed to have received a distribution
or dividend subject to United States federal income tax as a result of an
adjustment or the nonoccurrence of an adjustment to the conversion price. See
"Certain Federal Income Tax Considerations -- Adjustments to Conversion
Rate -- Constructive Dividends."
SUBORDINATION OF NOTES
The notes are general unsecured obligations of our company, and are
subordinated in right of payment to all our existing and future Senior
Indebtedness. In addition, the notes are structurally subordinated to all
indebtedness and other liabilities of our subsidiaries. The indenture does not
restrict the amount of Senior Indebtedness or other indebtedness of our company
or any subsidiary of our company. You should read the information under the
headings "Risk Factors -- The Notes are Subordinated to our Senior Indebtedness
and All the Obligations of Our Subsidiaries" and "Risk Factors -- Our Ability to
Repurchase Notes if a Designated Event Occurs is Limited" and in the
accompanying prospectus under the heading "Description of Debt
Securities -- Subordination of Subordinated Debt Securities" for more
information on the subordination of the notes.
REPORTS
Whether or not required by the rules and regulations of the SEC, so long as
any notes are outstanding, we will file with the SEC and furnish to the trustee
and the holders of notes all quarterly and annual financial information (without
exhibits) required to be contained in a filing with the SEC 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 on the annual consolidated financial
statements by our independent auditors. We are not required to file any report
or other information with the SEC if the SEC does not permit the filing.
BOOK-ENTRY DELIVERY AND FORM; GLOBAL NOTE
The notes will initially be issued in the form of a global security held in
book-entry form. DTC or its nominee will be the sole registered holder of the
notes for all purposes under the indenture. Owners of beneficial interest in the
notes represented by the global security will hold such interests pursuant to
procedures and practices of DTC. As a result, owners of beneficial interests
must exercise any rights in respect of their interests, including any right to
convert or require repurchase of their interests, in accordance with the
procedures and practices of DTC. Beneficial owners will not be holders and will
not be entitled to any rights under the global security or the indenture with
respect to the global security. SCI and the trustee, and any of their respective
agents, may treat DTC as the sole holder and owner of the global security. A
description of special considerations for global securities and securities
issued under the book-entry system are found under the heading "Legal Ownership
of Securities" in the accompanying prospectus.
DTC has advised us that 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 New York Uniform
Commercial Code; and
- a "clearing agency" registered pursuant to the provision of Section 17A
of the Exchange Act.
DTC was created to hold securities of institutions that have accounts with
DTC and to facilitate the clearance and settlement of securities transactions
among its participants in securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates.
S-19
<PAGE> 20
DTC's participants include:
- securities brokers and dealers;
- banks;
- trust companies;
- clearing corporations; and
- certain other organizations.
Access to DTC's book-entry system is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, whether directly or indirectly.
Upon the issuance of the global note, DTC credited, on its book-entry
registration and transfer system, the respective principal amount of the
individual beneficial interests represented by the global note to the accounts
of participants. The accounts credited were designated by the initial purchasers
of the beneficial interests. Ownership of beneficial interests in the global
note is limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the global note shown on, and
the transfer of those ownership interests will be effected only through, records
maintained by DTC (with respect to participant's interests) and the participants
(with respect to the owners of beneficial interests in the global note other
than participants).
So long as DTC or its nominee is the registered holder and owner of the
global note, DTC or its nominee, as the case may be, will be considered the sole
legal owner of the notes represented by the global note for all purposes under
the indenture and the notes. Owners of beneficial interests in the global note
will not be entitled to receive definitive notes and will not be considered to
be the owners or holders of any notes under the global note. We understand that
under existing industry practice, in the event an owner of a beneficial interest
in the global note desires to take any action that DTC, as the holder of the
global note, is entitled to take, DTC would authorize the participants to take
the action, and that participants would authorize beneficial owners owning
through the participants to take the action or would otherwise act upon the
instruction of beneficial owners owning through them. No beneficial owner of an
interest in the global note will able to transfer the interest except in
accordance with DTC's applicable procedures.
We will make payments of the principal of, and interest on, the notes
represented by the global note registered in the name of and held by DTC or its
nominee to DTC or its nominee, as the case may be, as the registered owner and
holder of the global note.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest in respect of the global note, will credit participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of the global note as shown on the records of DTC or its
nominee. We also expect that payments by participants and indirect participants
to owners of beneficial interests in the global note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for accounts of customers registered in
the names of nominees for these customers. The payments, however, will be the
responsibility of the participants and indirect participants, and neither we,
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 the global note;
- maintaining, supervising or reviewing any records relating to the
beneficial ownership interests;
- any other aspect of the relationship between DTC and its participants; or
- the relationship between the participants and indirect participants and
the owners of beneficial interests in the global note.
S-20
<PAGE> 21
Unless and until it is exchanged in whole or in part for definitive notes,
the global note may not be transferred except as a whole by DTC to a nominee of
DTC or by a nominee of DTC to DTC or another nominee of DTC.
If DTC is at any time unwilling or unable to continue as a depositary for
the global note or ceases to be a clearing agency registered under the Exchange
Act and we do not appoint a successor depositary within 90 days, we will issue
definitive notes in exchange for the global note. The definitive notes will be
subject to certain restrictions on registration of transfers and will bear
appropriate legends concerning these restrictions.
TRANSFER AND EXCHANGE
We have initially appointed the trustee as registrar in New York, New York.
We reserve the right to vary or terminate the appointment of the registrar or to
appoint additional or other registrars or to approve any change in the office
through which the registrar acts.
A holder may transfer or exchange notes in accordance with the indenture.
The registrar may require a holder, among other things, to furnish appropriate
endorsements and transfer documents and pay any taxes and fees required by law
or permitted by the indenture. We are not required to exchange or register the
transfer of any note selected for redemption. Also, we are not required to
exchange or register the transfer of any note for a period of 15 days before the
mailing of a notice of redemption of notes to be redeemed.
All notes that our company or any of our subsidiaries or affiliates redeem,
purchase or otherwise acquire prior to the final maturity date of the notes
shall be delivered to the trustee for cancellation. We will not hold or resell
any of these notes or issue any new notes to replace any of these notes or any
other notes that any holder has converted pursuant to the indenture.
We will treat the registered holder of a note as the owner of the note for
all purposes.
NOTICES
We will give or cause to be given notices to holders of the notes by mail
to the addresses of the holders as they appear in the note register. The notices
will be deemed to have been given on the date of the mailing or on the date of
the first publication, as the case may be.
GOVERNING LAW
The indenture and the notes are governed by and construed in accordance
with the laws of the State of New York, United States of America.
CONCERNING THE TRUSTEE
The indenture contains limitations on the rights of the trustee, should it
become a creditor of our company, to obtain payment of claims in certain cases,
or to realize on certain property received in respect of any claim as security
or otherwise. The trustee will be permitted to engage in other transactions with
us; however, if the trustee acquires any conflicting interest it must eliminate
the conflict within 90 days, apply to the SEC for permission to continue or
resign.
The holders of a majority in principal amount of outstanding notes have the
right to direct the time, method and place of conducting any proceeding for
exercising any remedy available to the trustee, subject to exceptions. The
indenture provides that, if an event of default occurs (which is not cured), the
trustee will be required, in the exercise of its power, to use the degree of
care of a prudent person in the conduct of the person's own affairs. Subject to
these 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 the holder shall have offered to the trustee security and indemnity
satisfactory to the trustee against any loss, liability or expense.
S-21
<PAGE> 22
CERTAIN 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 of common stock into which the 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 interpretations of laws, regulations, rulings
and decisions now in effect, all of which are subject to change. This summary
addresses the tax considerations with respect to only those holders that will
hold the notes and common stock into which notes may be converted as "capital
assets" (within the meaning of Section 1221 of the Internal Revenue Code of
1986, as amended, referred to as the Code) and does not address tax
considerations applicable to investors that may be subject to special tax rules,
such as, for example, banks, tax-exempt organizations, insurance companies,
dealers in securities or currencies or persons that will hold the notes as a
position in a hedging transaction, "straddle" or "conversion transaction" for
tax purposes. This summary does not address the tax considerations (either
United States or foreign) of ownership of a note, or common stock issued upon
conversion of a note, by a non-U.S. person. This summary discusses the tax
considerations applicable to the initial purchasers of the notes who purchase
the notes at their "issue price" as defined in Section 1273 of the Code and does
not discuss the tax considerations applicable to subsequent purchasers of the
notes. The Company has not sought any ruling from the Internal Revenue Service,
referred to as the IRS, with respect to the statements made and the conclusions
reached in the following summary, and there can be no assurance that the IRS
will agree with such statements and conclusions. In addition, the IRS is not
precluded from successfully adopting a contrary position. This summary does not
consider the effect of any applicable foreign, state, local or other tax laws.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME 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.
Payment of Interest
Interest on a note generally will be includable in the income of a 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 the notes, a 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 will be taxed as such) and (ii) such holder's
adjusted tax basis in the notes. A holder's adjusted tax basis in the notes
generally will equal the cost of the notes to such holder. Such capital gain or
loss will be long-term capital gain or loss if the holder's holding period in
the notes is more than one year at the time of sale, exchange or redemption.
Conversion of the Notes
A holder generally will not recognize any income, gain or loss upon
conversion of the notes into common stock after the notes have been called for
redemption (except to the extent of cash received in lieu of the issuance of a
fractional share of common stock). A holder's tax basis in the common stock
received on conversion of the notes generally will be the same as such holder's
adjusted tax basis in the notes 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
notes 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
S-22
<PAGE> 23
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 holder's adjusted tax basis in the fractional share), and generally will
be long-term capital gain or loss if the notes were held for more than one year
at the time of conversion.
Dividends
Dividends paid on the common stock generally will be includable in the
income of a holder as ordinary income to the extent of SCI's current or
accumulated earnings and profits.
Adjustments to Conversion Rate -- Constructive Dividends
A holder of a note may be considered in receipt of a taxable dividend, even
though there has been no distribution of cash or property to the holder, if at
any time (i) SCI makes a distribution of cash or property to its stockholders or
purchases common stock and such distribution or purchase would be taxable to
such stockholders as a dividend for United States federal income tax purposes
(e.g., distributions of evidence of indebtedness or assets of SCI, but generally
not stock dividends or rights to subscribe for common stock) and, pursuant to
the antidilution provisions of the indenture, the conversion price of the notes
is decreased, or (ii) the conversion price of the notes is decreased at the
discretion of SCI. Similarly, a failure to adjust the conversion rate to reflect
a stock dividend or other event increasing the proportionate interest of the
holders of outstanding common stock could, in some circumstances, give rise to
deemed dividend income to holders of such common stock.
Sale of Common Stock
Upon the sale or exchange of common stock, a holder generally will
recognize capital gain or loss equal to the difference between (i) the amount of
cash and the fair market value of any property received upon the sale or
exchange and (ii) such holder's adjusted tax basis in the common stock. Such
capital gain or loss generally will be long-term capital gain or loss if the
holder's holding period in common stock is more than one year at the time of the
sale or exchange. A holder's basis and holding period in common stock received
upon conversion of the notes are determined as discussed above under "Conversion
of the Notes."
Information Reporting and Backup Withholding Tax
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on the notes, payments of dividends on
common stock, payments of the proceeds of the sale of the notes and payments of
the proceeds of the sale of common stock to certain noncorporate holders, and
31% backup withholding tax may apply to such payments if the holder (i) fails to
furnish or certify his correct taxpayer identification number to the payor in
the manner required, (ii) is notified by 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 holder will be allowed as a credit against such holder's United States
federal income tax and may entitle the holder to a refund, provided that the
required information is furnished to the IRS.
S-23
<PAGE> 24
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and we have agreed to sell to such underwriter, the principal amount
of notes set forth opposite the name of such underwriter.
<TABLE>
<CAPTION>
PRINCIPAL
NAME AMOUNT OF NOTES
- ---- ---------------
<S> <C>
Salomon Smith Barney Inc.................................... $
Banc of America Securities LLC..............................
------------
Total............................................. $400,000,000
============
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the notes included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the notes (other than those
covered by the over-allotment option described below) if they purchase any of
the notes.
The notes are expected to be listed on the New York Stock Exchange under
the symbol "SCI07." Our common stock is listed on the New York Stock Exchange
under the symbol "SCI."
The underwriters, for whom Salomon Smith Barney Inc. is acting as
representative, initially propose to offer some of the notes directly to the
public at the public offering price stated on the cover page of this prospectus
supplement and some of the notes to certain dealers at the public offering price
less a concession not in excess of % of the principal amount of the notes.
The underwriters may allow, and these dealers may re-allow, a concession not in
excess of % of the principal amount of the notes on sales to certain other
dealers. After the initial offering of the notes to the public, the public
offering price may be changed by the representative.
We have granted to each of the underwriters an option, exercisable for 30
days from the date hereof, to purchase up to an aggregate of $60,000,000
principal amount of additional notes. Each of the underwriters may exercise such
option solely for the purpose of covering over-allotments, if any, in connection
with the offering of the notes. To the extent that the underwriters exercise
such option, each underwriter will be obligated, subject to certain conditions,
to purchase such additional notes proportionate to such underwriter's initial
commitment.
We and certain of our executive officers and directors have agreed that,
for a period of 45 days from the date of the execution of the underwriting
agreement, we and they will not, without the prior written consent of Salomon
Smith Barney Inc., offer, sell, contract to sell, or otherwise dispose of, any
shares of common stock of SCI or any securities convertible into, or exercisable
or exchangeable for, common stock (subject to limited exception). Salomon Smith
Barney Inc. in its sole discretion may release any of the securities subject to
these lock-up agreements at any time without notice.
The following table shows the underwriting discounts and commissions we
will pay to the underwriters in connection with this offering, expressed as a
percentage of the aggregate principal amount of the notes.
<TABLE>
<CAPTION>
PAID BY SCI
-----------
<S> <C>
Per note.................................................... %
</TABLE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of
the underwriters, may purchase and sell notes in the open market. These
transactions may include over-allotment, syndicate covering transactions and
stabilizing transactions. Over-allotment involves syndicate sales of notes in
excess of the principal amount of notes to be purchased by the underwriters in
the offering, which creates a
S-24
<PAGE> 25
syndicate short position. Syndicate covering transactions involve purchases of
the notes in the open market after the distribution has been completed in order
to cover syndicate short positions. Stabilizing transactions consist of certain
bids or purchases of notes made for the purpose of preventing or retarding a
decline in the market price of the notes while the offering is in progress.
The underwriters may also impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases notes originally sold by that syndicate
member.
Any of these activities may cause the price of the notes to be higher than
the price that otherwise would exist in the open market in the absence of such
transactions. These transactions may be effected in the over-the-counter market
or otherwise and, if commenced, may be discontinued at any time.
We estimate that we will spend approximately $500,000 for printing, rating
agency, listing, trustee and legal fees, and other expenses related to the
offering.
In the ordinary course of their respective businesses, the underwriters and
their affiliates have engaged, and may in the future engage, in commercial
banking and/or investment banking transactions with us and our affiliates. A
portion of the net proceeds of this offering are expected to be used to repay
indebtedness owed to certain of the underwriters and their affiliates.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.
LEGAL MATTERS
The validity of the notes and the shares of our common stock issuable upon
conversion of the notes will be passed upon for us by Powell, Goldstein, Frazer
& Murphy LLP, Atlanta, Georgia, counsel for the Company, and certain legal
matters will be passed upon for the underwriters by Cleary, Gottlieb, Steen &
Hamilton, New York, New York.
S-25
<PAGE> 26
PROSPECTUS
$800,000,000
(SCI LOGO)
SCI SYSTEMS, INC.
Debt Securities, Preferred Stock, Common Stock
Depositary Shares and Warrants
-------------------------
When we offer securities, we will provide you with a prospectus supplement
describing the terms of the specific issue of securities, including the offering
price of the securities. The prospectus supplements may also add, update or
change information contained in this prospectus. You should read this prospectus
and any supplements carefully before you invest.
-------------------------
Our common stock is traded on the New York Stock Exchange
under the symbol "SCI."
-------------------------
INVESTING IN THESE SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 9 OF THIS PROSPECTUS.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
The date of this prospectus is February 8, 2000.
<PAGE> 27
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
About this Prospectus....................................... 3
Forward-Looking Statements.................................. 3
SCI Systems, Inc. .......................................... 3
Risk Factors................................................ 9
Use of Proceeds............................................. 13
Consolidated Ratio of Earnings to Fixed Charges............. 13
The Securities.............................................. 13
Legal Ownership of Securities............................... 14
Description of Debt Securities.............................. 18
Description of Capital Stock................................ 34
Description of Depositary Shares............................ 35
Description of Warrants..................................... 38
Plan of Distribution........................................ 40
Legal Matters............................................... 41
Experts..................................................... 41
Where You Can Find Additional Information................... 41
Incorporation of Certain Documents by Reference............. 42
</TABLE>
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<PAGE> 28
ABOUT THIS PROSPECTUS
This prospectus is part of a Registration Statement on Form S-3 that we
filed with the Securities and Exchange Commission utilizing a "shelf "
registration process. Under this shelf process, we may, from time to time, sell
any combination of securities described in this prospectus in one or more
offerings. This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any applicable prospectus supplement together with additional information
described below under the heading "Where You Can Find More Information."
When used in this prospectus and any prospectus supplement, the terms
"SCI", "we", "our", "us" and the "Company" refer to SCI Systems, Inc. and its
subsidiaries, unless the context requires otherwise.
FORWARD-LOOKING STATEMENTS
We make "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, throughout this prospectus, supplements to
this prospectus and in the documents we incorporate by reference into this
prospectus. You can identify these statements by forward-looking words such as
"may," "will," "expect," "anticipate," "believe," "estimate," "plan" and
"continue" or similar words. We have based these statements on our current
expectations about future events. Although we believe that our expectations
reflected in or suggested by our forward-looking statements are reasonable, we
cannot assure you that these expectations will be achieved. Our actual results
may differ materially from what we currently expect. Important factors which
could cause our actual results to differ materially from the forward-looking
statements in this prospectus or in the documents that we incorporate by
reference into this prospectus are set forth in the "Risk Factors" section of
this prospectus, and elsewhere in this prospectus, in supplements to this
prospectus and in the documents that we incorporate by reference into this
prospectus.
You should read this prospectus, supplements to this prospectus and the
documents that we incorporate by reference into this prospectus completely and
with the understanding that our actual future results may be materially
different from what we expect. We may not update these forward-looking
statements, even in the event our situation changes in the future. All written
or oral forward-looking statements attributable to us are expressly qualified by
these cautionary statements.
SCI SYSTEMS, INC.
We are a diversified international electronics manufacturing services
provider. We design, manufacture, distribute, and service electronic products
for virtually every market segment. Markets served by us include the computer,
peripheral, datacom, telecom, medical, industrial, consumer, aerospace, defense,
and entertainment industries, as well as the U.S. Government.
Founded in 1961, we were initially engineering oriented -- with the U.S.
Government's National Aeronautics and Space Administration (NASA) and its prime
contractors as our
3
<PAGE> 29
early customers. Building on a strong technical and engineering base, which we
still maintain today, we participated in a number of significant Department of
Defense programs and later expanded into a variety of commercial activities.
In the mid-1970s, we pioneered the electronic contract manufacturing
services industry, which encompasses a full range of outsourcing services to
Original Equipment Manufacturers (OEMs) for the production and assembly of
electronic products, including engineering, procurement and inventory
management, testing, distribution and depot repair services. We became the
world's premier provider of electronics manufacturing services, and we continue
as a leader in surface mount technology (SMT) production capacity.
Although we derive much of our revenue from hardware manufacturing and
maintain a broad technology base, we are primarily a vertically integrated
engineering and manufacturing services provider with dedication to close
customer interaction forming the cornerstone of our activities. The key elements
of our operating philosophy -- quality products, competitive pricing, and
customer responsiveness -- are a proven foundation for success. These
fundamental tenets will continue to guide us as we pursue opportunities for
growth and expansion.
Our customers have included many of the foremost global OEMs that require
electronic manufacturing services, such as Hewlett-Packard, Compaq, Dell,
Nortel, Nokia, Ericsson, Philips, Cabletron, General Electric, Roche, Johnson &
Johnson, Boeing, Houston Tracker, Intel, ADM, LSI Logic, and McData.
We currently have 37 facilities in 17 different countries. We believe we
produce the broadest range of subassemblies and finished products of any
electronic manufacturing services company. These products and a full range of
engineering, distribution, logistic, and after sales services are supplied to a
large multinational customer base for a highly diversified mix of commercial
applications as well as for military and space programs. The following is a
partial listing of products that we build.
Telecommunications Products
- Cable modems for high-speed Internet access
- Terminals for tracking vehicles and cargo containers via satellite
- Broadband digital access products for fiber-to-the-curb installations
- Transaction automation systems
- Printed circuit board (PCB) assemblies for use in:
- public switching equipment
- ground-based RF telephone systems
- high speed modems
- PCMCIA-format plug-in modems
- large cellular network base stations
- advanced multiplex equipment
- credit card processors
- token ring switches
- PCB assemblies and finished products for:
- routers
- hubs
- switches
- multiplexers
- GSM radios
- battery chargers for cellular products
- power systems for base stations
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<PAGE> 30
Computers
- Personal Computer (PC), server, and workstation motherboards
- Home computers
- Office computers
- Microprocessor modules
- ATM motherboards
- Notebook computers
- Workstations
- Servers
- Ruggedized computers
Industrial Products
- Bar code readers
- Test and measurement systems
- Hand held tracking devices
- Battery chargers for electric vehicles
- Semiconductor processing equipment
- Hand held engine analyzers
- Sheet metal, plastic, and machined components
- Ruggedized high reliability assemblies for:
- railroad locomotives
- broadcast equipment
- studio and remote programming systems
- special effects units
- signal and transmission routing and processing systems
- automotive sensors
Military and Aerospace Products
- Aircraft voice and digital communications control systems
- GPS User Equipment for fixed-wing aircraft, helicopters, and ships
- Systems for the Apache Longbow helicopter: systems computers, weapons
computers, and communications processors
- Tactical communications - ruggedized field telephones and shelter
communications systems
- Fiber Optic Guided Missile gunner consoles and fiber optic dispensers
system
- Data Bus products for aircraft
- Current mode couplers and Standard Interface Modules for aircraft
- Flight test instrumentation systems for joint service applications on a
wide range of aircraft
- Nonvolatile memories for aircraft and satellite applications
- Interference blanker systems for aircraft
- Data acquisition systems for the Titan IV Launch Vehicle
- Family of standard bus computer subsystems
- Satellite terminals - two-way terrestrial terminals for voice, data, and
telephony
- Sincgars radio card assemblies
Peripheral Products
- Color ink-jet printers
- High resolution color scanners and printers
- Point-of-sale data entry and management systems
- Video monitors
- Data terminals
- Network interface assembly
- Backplanes
5
<PAGE> 31
- Notebook docking stations
- Asynchronous Transfer Mode control units
- Credit verification systems
- Memory modules
- PCB assemblies for use in:
- disk drives
- disk array systems
- optical storage devices and systems
- tape drives
- large automated tape libraries
- graphic design systems
- graphics accelerators
- ink-jet, thermal, and dot-matrix printers
- color plotters
- copiers
Consumer Products
- Video projectors
- Internet "TV set top" converters
- Family of digital TV receiver products for:
- direct broadcast satellites
- fixed cables
- ground based broadcast
- Miniature printed circuit board assemblies for:
- camera products
- cellular telephones
- Automotive control/dashboard products
Medical Products
- Vital signs monitoring equipment
- Blood glucose monitors
- Electronic controls for X-ray equipment
- Printed circuit board assemblies for:
- Computer Tomography (CT) scanners
- Magnetic Resonance Imaging (MRI) machines
- X-ray systems
- ultrasound systems
- infusion pumps
- sleep apnea pressure pumps
ENGINEERING SERVICES
Many of our existing and potential customers are in various stages of
migrating from vertical integration (where they perform all services to bring
products to market in house) to virtual integration (where separate service
providers tied together over the Internet, work together to bring products to
market, resulting in very active and timely data interchange) and will
increasingly rely on the electronic manufacturing services industry for new
product development and introduction support. We are benefiting from this trend,
having begun as an engineering oriented company and currently possessing the
most extensive product development and related support resources of any company
in our industry. These engineering resources, coupled with our global supply
chain, manufacturing, test, distribution, and after sale support capabilities,
serve to promote lasting strategic partnerships. Engineering support is a
growing influence on our customers' ability to realize their outsourcing
objectives of lower total cost, shorter time to market, reduced capital
investment, enhanced risk management, access to leading technologies, and
flexible manufacturing and distribution capacity.
6
<PAGE> 32
The depth and breadth of our engineering resources and capabilities
differentiate SCI from our competitors with customers seeking to enhance the
product development process through a relationship with a provider of electronic
manufacturing services. SCI is an expert in the design of products and systems
with particular emphasis on computer, communications, and instrumentation
technologies. Our product development engineers and technical support personnel
provide our customers with electronic, mechanical, software, and system
engineering services. We employ in excess of 2,000 engineering personnel,
including engineers specializing in the additional disciplines of quality,
reliability, component, manufacturing, test, industrial, and environmental
engineering.
MANUFACTURING TECHNOLOGY
We utilize leading edge manufacturing processes and equipment. We
aggressively invest in the very latest manufacturing and electronic interconnect
technologies and actively analyze and anticipate new manufacturing technologies.
Our equipment is continuously upgraded or replaced to provide increased
production throughput, higher productivity, and greater accuracy and
reliability, and to utilize the latest assembly technologies.
COMPANY ORGANIZATION
SCI is organized into decentralized divisions and plants with leadership,
oversight, and certain core services provided from our corporate center. We
currently operate 37 facilities in 17 countries organized into 8 divisions.
TECHNOLOGY DIVISION
The Technology Division consists of three plants in Alabama and a plant in
Colorado. The Division was formed by combining SCI's domestic commercial
development engineering and support resources with its former Government
Division to allow us to focus technology resources on a range of commercial and
government activities. In addition to manufacturing products for its own
customers, this Division serves as a corporate wide resource to design and
support customer products manufactured in SCI facilities around the world. The
Division's product line ranges from military and space products built and tested
to exacting standards to a range of commercial products built to order in lot
size of one and delivered directly to the customer base.
PERSONAL COMPUTER DIVISION
The Personal Computer Division has two plants in Alabama and a plant in the
Netherlands, all producing a variety of finished personal computers (PCs) in
high volumes. One plant serves as the main production facility for a customer's
global corporate PC business. Another provides assembly of a family of finished
consumer PC products for the North American market. The Netherlands plant
provides final assembly of PCs for the European market.
WESTERN DIVISION
The four plants of the Western Division are located in California, South
Dakota, and Colorado, and serve the Western United States. The plants operate a
large number of automated assembly lines and offer a full range of manufacturing
services, primarily in high-mix medium volume production of subassemblies for
major customers. Additionally, one of
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the Division's operations provides fabricated sheet metal products and
assemblies, generally referred to as enclosures, to OEMs and other electronic
manufacturing service providers. The Division's plants provide extensive new
product introduction services.
SOUTHEASTERN DIVISION
The Southeastern Division serves customers in the Southeastern United
States from three plants in Alabama and one plant in North Carolina. One Alabama
plant specializes in general machining, sheet metal fabrication, plastic
molding, and system integration of precision mechanical products. This plant's
services are available to all SCI plants. High-volume products of this Division
include medical devices and satellite TV receivers. A plant in Brazil provides
production support for global customers' South American market. That plant is
positioned to capitalize on growth opportunities in that promising regional
market.
NORTHEASTERN DIVISION
The four plants of the Northeastern Division -- in Maine, New Hampshire,
Quebec and Ontario -- serve the Northeastern United States and Canada. The
plants primarily produce subassemblies for graphics equipment and for the data
communication and telecommunication industries. The plants also perform final
assembly of several computer products.
MEXICAN DIVISION
The Mexican Division has two plants in Guadalajara and one each in
Monterrey and Mexico City and operates SCI's largest number of automated
production lines. The Division provides services to multinational customers for
the North American computer, peripheral, and high-end consumer product markets.
An export logistics center is located in Texas to service this Division and the
Brazilian plant.
ASIAN DIVISION
From plants in Singapore, Thailand, Malaysia, and mainland China, the Asian
Division serves its region with a large number of high-volume automated assembly
lines. The plants produce subassemblies for shipment to numerous customer final
assembly plants, as well as finished products for multinational distribution.
EUROPEAN DIVISION
The European Division operates eight plants, located in Scotland, Ireland,
France, Israel, Hungary, Finland, Sweden, and Spain. SCI's European capacity has
expanded rapidly in recent years. This Division's plant capabilities offer a
full line of production services to a sizeable number of global customers in
proximity to their markets. Principal markets include telecommunication
equipment, peripheral products, and multimedia TV reception units.
PRINCIPAL EXECUTIVE OFFICES AND WEBSITE
Our principal executive offices are located at 2101 West Clinton Avenue,
Huntsville, Alabama, 35805, and our telephone number is (256) 882-4800. Our
website is located at www.sci.com. Information contained in our website is not a
part of this prospectus or the documents incorporated by reference in this
prospectus.
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RISK FACTORS
Before you invest in the securities that we are offering, you should be
aware that the occurrence of any of the events described in this risk factor
section and elsewhere in this prospectus or in a supplement to this prospectus
could have a material adverse effect on our business, financial condition and
results of operations. You should carefully consider these risk factors and the
specific risks set forth under the caption "Risk Factors" in any supplement to
this prospectus, together with all of the other information included in this
prospectus or in a supplement to this prospectus and in documents we incorporate
by reference before you decide to purchase our securities. You may obtain the
information incorporated by reference into this prospectus without charge by
following the instructions in the "Where You Can Find More Information" section
of this prospectus.
A MAJORITY OF OUR REVENUES COMES FROM A LIMITED NUMBER OF CUSTOMERS; REDUCTIONS
IN SALES TO THESE CUSTOMERS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS
A majority of our revenues are derived from direct sales to original
equipment manufacturers. Although we have several hundred customer accounts, in
any particular period a significant percentage of sales is derived from a
limited group of customers. We expect Hewlett-Packard, Compaq, Dell and Nortel
each to account for more than 10% of annual sales in the current fiscal year. In
fiscal year 1999, our ten largest customers contributed more than 75% of
revenues. Significant reductions in sales to any of these customers could have a
material adverse effect on our results of operations.
Customer contracts can be canceled and volume levels changed or delayed at
any time without notice, subject to cancellation costs, if any. Timely
replacement of canceled, delayed, or reduced contracts with new business cannot
be assured. These risks are exacerbated as a majority of our sales are to
customers in the electronics industry, which is subject to rapid market and
technological changes and frequent product obsolescence. Factors affecting the
electronics industry in general or any of the our major customers in particular
could have a material adverse effect upon our results of operations.
WE ARE SUBJECT TO CREDIT RISKS WITH CUSTOMERS
Our major contracts are with customers in the high technology industry.
Credit terms relating to both accounts receivable and contract inventories are
extended to customers after performing credit evaluations. When significant
credit risks exist, letters of credit or other appropriate security are
generally requested. However, credit losses on customer contracts have occurred
in the past and no assurances can be given that credit losses, which could be
material, will not reoccur.
OUR RAPID GROWTH MAY BE DIFFICULT TO MANAGE
We have experienced rapid growth over recent years. We have acquired and
built substantial facilities in several locations and continue to do so. There
can be no assurance that historical revenue growth will continue or that we will
successfully manage existing operations or future plants we may acquire or
build. As we manage our operations and expand geographically, we may experience,
as we have in the past, inefficiencies related to new operations and broadened
geographic diversification. We may be adversely affected by new and acquired
facilities that do not achieve growth sufficient to offset increased
expenditures associated with expansion. In addition, should we increase capacity
and
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expenditures in anticipation of future sales levels which do not materialize,
profitability could be adversely affected. Moreover, occasionally customers may
require rapid production increases which can stress our resources.
OUR RESULTS OF OPERATIONS MAY BE AFFECTED BY THE SEASONALITY OF OUR BUSINESS
We have not historically considered our business to be consistently
seasonal, although seasonal demands for some customers' products sold to
consumers may impact our quarterly revenues. In recent periods the proportion of
our products ultimately sold at retail has expanded, which has increased
seasonality in our sales. Operating margins have seen seasonal fluctuations in
the past, particularly in the first fiscal quarter due to slowing effects of the
summer season. We believe these seasonality effects may continue.
OUR INTERNATIONAL OPERATIONS ARE SIGNIFICANT AND INCREASING; THIS INCREASES OUR
EXPOSURE TO THE RISKS OF GLOBAL OPERATIONS
We operate internationally with the majority of revenue generated in the
United States, but with significant foreign activities. Our U.S. export and
foreign sales represented 44% of total sales in 1999, 34% in 1998, and 26% in
1997. Additionally, much of our manufacturing material is sourced from
international suppliers. As a result of our international sales and facilities,
our operations are subject to a variety of risks that are unique to our
international operations, including the following:
- adverse movement of foreign currencies against the U.S. dollar (our
reporting currency);
- import and export duties and value added taxes that we may have to
absorb;
- import and export regulation changes that could affect our profit margins
or restrict exports;
- potential restrictions on the transfer of funds; and
- the burden and cost of compliance with foreign laws.
WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY
We operate primarily in the electronics manufacturing services industry. We
compete against numerous domestic and foreign companies which participate in our
industry. We also face competition from current and prospective customers who
evaluate our capabilities against the merits of internal manufacturing.
Competition varies depending upon the type of service offered and the geographic
area of competition. Competition is intense and is expected to continue to be so
as more companies enter our industry and existing competitors expand capacity.
We could be adversely affected if our competitors introduce superior or lower
priced services.
To remain competitive, we must continue to develop and provide
technologically advanced engineering services, information systems, and
manufacturing processes. We must also maintain high quality, offer flexible
delivery schedules, deliver products on a timely basis, and continue to price
our products and services competitively. Failure to satisfy any of the foregoing
requirements could adversely affect us.
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SHORTAGES IN THE AVAILABILITY AND INCREASED PRICES OF ELECTRONIC COMPONENTS MAY
AFFECT OUR RESULTS OF OPERATIONS
Components are sourced on a global basis. Component availability is
periodically subject to constraints, shortages, and abundances. Many components
are available only from a limited number of sources. Some components are subject
to periodic allocation by suppliers. Although no assurances can be given, we
have generally been able to obtain adequate supply to maintain production when
shortages occur. However, shipment delays have occurred and may reoccur.
Significant component constraints could adversely affect us. Our revenues are
mainly generated from turnkey manufacturing services. Accordingly, average
selling prices for our products fluctuate proportionally to component prices.
OUR OPERATING RESULTS MAY FLUCTUATE DUE TO A NUMBER OF FACTORS
Our operating results are dependent upon our ability to identify and react
in a timely manner to changes in business conditions and customer requirements,
especially our actions in balancing inventory quantities, property, plant, and
equipment capacity, staffing levels, and liquidity amounts. Accordingly,
operating results could vary over time as such conditions change.
WE DEPEND ON KEY PERSONNEL
Our success depends largely upon the efforts and abilities of key
managerial and technical employees. The loss of services of certain key
personnel could adversely affect us. Our business depends upon our ability to
recruit, train, and retain senior managers, skilled professional and technical
salaried personnel, and skilled and semiskilled hourly employees at competitive
costs for which there is intense competition. Failure to do so could adversely
affect us.
WE ARE SUBJECT TO ENVIRONMENTAL RISKS
We are subject to a variety of environmental regulations relating to the
use, storage, discharge, and disposal of hazardous materials used in our
manufacturing processes. Our failure to comply with present and future
regulations could subject us to future liabilities or the suspension of
production. In addition such regulations could restrict our ability to expand
our facilities or could require us to acquire costly equipment or to incur other
significant expenses to comply with environmental regulations.
WE ARE A PARTY TO LEGAL PROCEEDINGS
We are a party to several lawsuits incidental to our various activities and
incurred in the ordinary course of business. We believe that we have meritorious
claims and defenses in each case that either will absolve us of or limit our
liability. We also believe we have adequately provided for any likely material
adverse outcome of pending litigation. After consultation with counsel, it is
the opinion of management that, although there can be no assurance given, none
of the associated claims when resolved will have a material adverse effect upon
our consolidated financial position.
We, together with eighty-seven other defendants including our major
domestic competitors and customers, have been sued by the Lemelson Medical
Educational Research Foundation (Lemelson) alleging infringement on fifteen
patents relating to machine vision and
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use of bar coding and bar code readers in manufacturing. Lemelson has been
successful in settling similar assertions against certain automobile and
semiconductor manufacturers. Lemelson is requesting damages equal to a certain
percent of sales for a ten-year period. We, together with other major
defendants, intend to contest the validity of the patents. In addition, possible
recourse exists against the manufacturers of the equipment which Lemelson is
alleging violated its patents. While no guarantee can be given, we believe that
outcome of this lawsuit will not result in any material adverse effect to us.
The maximum exposure for this suit is currently estimated to be less than one
percent of the our current assets, and we have provided for what we believe will
be the likely outcome of the suit. Additionally, if Lemelson's patents are
upheld, we believe we will be able to obtain adequate licenses to use them.
WE ARE SENSITIVE TO INTEREST RATE FLUCTUATIONS
Short-term interest rate changes can impact the interest expense on our
variable interest rate debt, as well as the discount (reflected as interest
expense) on our accounts receivable sold under an asset securitization
agreement.
WE ARE EXPOSED TO FLUCTUATIONS IN THE EXCHANGE RATES OF FOREIGN CURRENCIES
We predominantly conduct our foreign sales and purchase transactions in
U.S. dollars or under customer contract provisions that protect against most
major currency risks. Our largest currency risk is that associated with
Brazilian operations. Unlike our other foreign operations, our plant in Brazil
is directly subjected to the effects of currency devaluation on certain
customers' contracts until forward pricing is adjusted accordingly (normally
monthly). During fiscal 1999, the Brazilian currency experienced severe
devaluations. This devaluation adversely impacted the results of the Brazilian
operation. We consider the Brazilian economic outlook too uncertain to predict.
Other currency exchange risks primarily relate to current assets and
liabilities denominated in other than the U.S. dollar. Although we endeavor to
balance such items against each other where possible at individual operations,
no assurance can be given that we will be successful in mitigating the effects
of changes in currency exchange rates upon such non-U.S. dollar transactions.
Changes in some foreign currency exchange rates impact the geographic areas
where our revenue is derived. When foreign currencies are devalued,
manufacturing costs of plants in those countries may become more competitive
with other established plants.
OUR STOCK PRICE MAY BE VOLATILE
Our common stock is traded on the New York Stock Exchange. Our common stock
market price has fluctuated substantially in the past and could fluctuate
substantially in the future based on a variety of factors including among
others:
- future announcements covering us or our key customers or competitors;
- demand for our services;
- changes in earnings estimates by analysts;
- fluctuations in quarterly operating results;
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- general conditions in the contract manufacturing, communications,
computer peripherals, personal computer, automotive or consumer products
industries;
- general economic, political and market conditions, such as recessions or
international currency fluctuations;
- litigation; and
- government regulations.
USE OF PROCEEDS
Unless otherwise indicated in the prospectus supplement, the net proceeds
from the sale of securities offered by this prospectus will be used for general
corporate purposes, including capital expenditures, the repayment or refinancing
of debt and to meet working capital needs. We expect from time to time to
evaluate the acquisition of businesses, products and technologies, for which a
portion of the net proceeds may be used. Pending such uses, we will invest the
net proceeds in interest-bearing securities.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The consolidated ratio of earnings to fixed charges for each of the periods
indicated is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, THREE MONTHS ENDED
-------------------------------------- -----------------------------
SEPTEMBER 27, SEPTEMBER 28,
1995 1996 1997 1998 1999 1998 1999
----- ----- ----- ----- ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges...... 5.11x 6.25x 7.20x 8.70x 10.02x 7.77x 16.54x
</TABLE>
For these ratios, "earnings" represents income before taxes plus fixed charges.
Fixed charges consist of interest expense and amortization of debt expenses.
THE SECURITIES
SCI may from time to time offer under this prospectus, separately or
together:
- unsecured senior or subordinated debt securities;
- shares of common stock;
- shares of preferred stock, which may be represented by depositary shares
as described below;
- warrants to purchase shares of common stock;
- warrants to purchase shares of preferred stock; and
- warrants to purchase debt securities.
The aggregate initial offering price of the offered securities will not
exceed $800,000,000.
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LEGAL OWNERSHIP OF SECURITIES
BOOK-ENTRY HOLDERS
SCI will issue debt securities in book-entry form only, unless it specifies
otherwise in a prospectus supplement. SCI may issue shares of common stock and
shares of preferred stock and warrants in book-entry form. If securities are
issued in book-entry form, this means the securities will be represented by one
or more global securities registered in the name of a financial institution that
holds them as depositary on behalf of other financial institutions that
participate in the depositary's book-entry system. These participating
institutions, in turn, hold beneficial interests in the securities on behalf of
themselves or their customers.
We will only recognize the person in whose name a security is registered as
the holder of that security. Consequently, for securities issued in global form,
we will recognize only the depositary as the holder of the securities and all
payments on the securities will be made to the depositary. The depositary passes
along the payments it receives to its participants, which in turn pass the
payments along to their customers who are the beneficial owners. The depositary
and its participants do so under agreements they have made with one another or
with their customers; they are not obligated to do so under the terms of the
securities.
As a result, investors will not own securities directly. Instead, they will
own beneficial interests in a global security, through a bank, broker or other
financial institution that participates in the depositary's book-entry system or
holds an interest through a participant. As long as the securities are issued in
global form, investors will be indirect holders, and not holders, of the
securities.
STREET NAME HOLDERS
In the future we may terminate a global security or issue securities
initially in non-global form. In these cases, investors may choose to hold their
securities in their own names or in "street name." Securities held by an
investor in street name would be registered in the name of a bank, broker or
other financial institution that the investor chooses, and the investor would
hold only a beneficial interest in those securities through an account he or she
maintains at that institution.
For securities held in street name, we will recognize only the intermediary
banks, brokers and other financial institutions in whose names the securities
are registered as the holders of those securities and all payments on those
securities will be made to them. These institutions pass along the payments they
receive to their customers who are the beneficial owners, but only because they
agree to do so in their customer agreements or because they are legally required
to do so. Investors who hold securities in street name will be indirect holders,
not holders, of those securities.
LEGAL HOLDERS
We, and any third parties employed by us or acting on our behalf, such as
trustees, depositories and transfer agents, are obligated only to the legal
holders of the securities. We do not have obligations to investors who hold
beneficial interests in global securities, in street name or by any other
indirect means. This will be the case whether an investor chooses to be an
indirect holder of a security or has no choice because we are issuing the
securities only in global form.
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For example, once we make a payment or give a notice to the holder, we have
no further responsibility for the payment or notice even if that holder is
required, under agreements with depositary participants or customers or by law,
to pass it along to the indirect holders but does not do so. Similarly, if we
want to obtain the approval of the holders for any purpose (for example, to
amend an indenture or to relieve us of the consequences of a default or of our
obligation to comply with a particular provision of the indenture) we would seek
the approval only from the holders, and not the indirect holders, of the
securities. Whether and how the holders contact the indirect holders is up to
the holders.
When we refer to you, we mean those who invest in the securities being
offered by this prospectus, whether they are the holders or only indirect
holders of those securities. When we refer to your securities, we mean the
securities being offered by this prospectus in which you hold a direct or
indirect interest.
SPECIAL CONSIDERATIONS FOR INDIRECT HOLDERS
If you hold securities through a bank, broker or other financial
institution, either in book-entry form or in street name, you should check with
your own institution to find out:
- how it handles securities payments and notices;
- whether it imposes fees or charges;
- how it would handle a request for the holders' consent, if ever required;
- whether and how you can instruct it to send you securities registered in
your own name so you can be a holder, if that is permitted in the future;
- how it would exercise rights under the securities if there were a default
or other event triggering the need for holders to act to protect their
interests; and
- if the securities are in book-entry form, how the depositary's rules and
procedures will affect these matters.
GLOBAL SECURITIES
A global security represents one or any other number of individual
securities. Generally, all securities represented by the same global securities
will have the same terms. We may, however, issue a global security that
represents multiple securities that have different terms and are issued at
different times. We call this kind of global security a master global security.
Each security issued in book-entry form will be represented by a global
security that we deposit with and register in the name of a financial
institution or its nominee that we select. The financial institution that is
selected for this purpose is called the depositary. Unless we specify otherwise
in the applicable prospectus supplement, The Depository Trust & Clearing
Corporation, New York, New York, known as DTC, will be the depositary for all
securities issued in book-entry form.
A global security may not be transferred to or registered in the name of
anyone other than the depositary or its nominee, unless special termination
situations arise. We describe those situations below under "Special Situations
When a Global Security Will Be Terminated." As a result of these arrangements,
the depositary, or its nominee, will be the sole registered owner and holder of
all securities represented by a global security, and investors will be permitted
to own only beneficial interests in a global security. Beneficial
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interests must be held by means of an account with a broker, bank or other
financial institution that in turn has an account with the depositary or with
another institution that does. Thus, an investor whose security is represented
by a global security will not be a holder of the security, but only an indirect
holder of a beneficial interest in the global security.
SPECIAL CONSIDERATIONS FOR GLOBAL SECURITIES
As an indirect holder, an investor's rights relating to a global security
will be governed by the account rules of the investor's financial institution
and of the depositary, as well as general laws relating to securities transfers.
We do not recognize this type of investor as a holder of securities and instead
deal only with the depositary that holds the global security.
If securities are issued only in the form of a global security, an investor
should be aware of the following:
- An investor cannot cause the securities to be registered in his or her
name, and cannot obtain non-global certificates for his or her interest
in the securities, except in the special situations we describe below.
- An investor will be an indirect holder and must look to his or her own
bank or broker for payments on the securities and protection of his or
her legal rights relating to the securities, as we describe under "Legal
Ownership of Securities" above.
- An investor may not be able to sell interests in the securities to some
insurance companies and to other institutions that are required by law to
own their securities in non-book-entry form.
- An investor may not be able to pledge his or her interest in a global
security in circumstances where certificates representing the securities
must be delivered to the lender or other beneficiary of the pledge in
order for the pledge to be effective.
- The depositary's policies, which may change from time to time, will
govern payments, transfers, exchanges and other matters relating to an
investor's interest in a global security. Neither we nor any third
parties employed by us or acting on our behalf, such as trustees and
transfer agents, have any responsibility for any aspect of the
depositary's actions or for its records of ownership interests in a
global security. We also do not supervise the depositary in any way.
- DTC requires that those who purchase and sell interests in a global
security within its book-entry system use immediately available funds and
your broker or bank may require you to do so as well.
- Financial institutions that participate in the depositary's book-entry
system, and through which an investor holds its interest in a global
security, may also have their own policies affecting payments, notices
and other matters relating to the security. There may be more than one
financial intermediary in the chain of ownership for an investor. We do
not monitor and are not responsible for the actions of any of those
intermediaries.
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SPECIAL SITUATIONS WHEN A GLOBAL SECURITY WILL BE TERMINATED
In a few special situations described below, a global security will be
terminated and interests in it will be exchanged for certificates in non-global
form representing the securities it represented. After that exchange, the choice
of whether to hold the securities directly or in street name will be up to the
investor. Investors must consult their own banks or brokers to find out how to
have their interests in a global security transferred on termination to their
own names, so that they will be holders. We have described the rights of holders
and street name investors above.
The special situations for termination of a global security are as follows:
- if the depositary notifies us that it is unwilling, unable or no longer
qualified to continue as depositary for that global security and we do
not appoint another institution to act as depositary within a specified
time period;
- if we elect to terminate that global security; or
- if an event of default has occurred with regard to securities represented
by that global security and has not been cured or waived.
The prospectus supplement may also list additional situations for
terminating a global security that would apply to a particular series of
securities covered by the prospectus supplement. If a global security is
terminated, only the depositary is responsible for deciding the names of the
institutions in whose names the securities represented by the global security
will be registered and, therefore, who will be the holders of those securities.
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DESCRIPTION OF DEBT SECURITIES
This prospectus describes the terms and provisions of the debt securities.
When we offer to sell a particular series of debt securities, we will describe
the specific terms of the securities in a prospectus supplement. The prospectus
supplement also will indicate whether the general terms and provisions described
in this prospectus apply to the particular series of debt securities.
The senior debt securities will be senior unsecured obligations of SCI
issued in one or more series under an indenture (the "senior indenture") to be
entered into between SCI and a U.S. banking institution, as trustee, whose name
will be set forth in the applicable supplement. The subordinated debt securities
will be subordinated unsecured obligations of SCI issued in one or more series
under an indenture (the "subordinated indenture") to be entered into between SCI
and a U.S. banking institution, as trustee, whose name will be set forth in the
applicable prospectus supplement. The forms of the indentures have been or will
be filed with the SEC as exhibits to the registration statement. The terms of
any series of debt securities will be those set forth in the applicable
indenture and such debt securities and those made part of the indenture by the
Trust Indenture Act.
Because the summary of the material provisions of the indentures and the
debt securities set forth below and the summary of the material terms of a
particular series of debt securities set forth in the applicable prospectus
supplement are not complete, you should refer to the forms of the applicable
indenture and the debt securities for complete information regarding the terms
and provisions of that indenture (including defined terms) and the debt
securities. Wherever particular articles, sections or defined terms of an
indenture are referred to, those articles, sections or defined terms are
incorporated herein by reference, and the statement in connection with which
such reference is made is qualified in its entirety by such reference.
GENERAL
The debt securities may be issued from time to time in one or more series.
The indentures do not limit the aggregate principal amount of debt securities
which SCI may issue thereunder and provide that SCI may issue debt securities of
any series thereunder up to an aggregate principal amount which SCI may
authorize from time to time.
Unless otherwise provided in a prospectus supplement, the senior debt
securities will be unsecured obligations of SCI and will rank equally with all
of its other unsecured and unsubordinated indebtedness. The subordinated debt
securities of each series will be unsecured obligations of SCI, subordinated in
right of payment to the prior payment in full of all Senior Indebtedness (which
term includes senior debt securities) of SCI with respect to such series, as
described below under "Subordination of Subordinated Debt Securities" and in the
applicable prospectus supplement.
The prospectus supplement relating to the series of debt securities offered
thereby will describe the specific terms of the debt securities offered. These
terms will include some or all of the following:
- the title or designation of such debt securities and whether the debt
securities will be senior debt securities or subordinated debt
securities;
- any limit on the aggregate principal amount of such debt securities;
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- the price or prices (expressed as a percentage of the principal amount
thereof) at which such debt securities will be issued;
- the date or dates on which the principal of and premium, if any, on such
debt securities will be payable, or the method or methods, if any, by
which such date or dates will be determined;
- the rate or rates at which such debt securities will bear interest, if
any, or the method or methods, if any, by which such rate or rates are to
be determined, the date or dates, if any, from which such interest will
accrue, or the method or methods, if any, by which such date or dates are
to be determined, and the basis upon which interest will be calculated if
other than that of a 360-day year of twelve 30-day months;
- the dates on which such interest, if any, will be payable and the record
dates, if any, therefor;
- the place or places, if any, other than or in addition to New York City,
of payment, transfer, conversion and/or exchange of the debt securities
and where notices or demands to or upon SCI in respect of the debt
securities may be served;
- if applicable, the date or dates on which, the period or periods within
which, the price or prices at which and the other terms and conditions
upon which debt securities may be redeemed at the option of SCI or are
subject to repurchase at the option of the holders;
- the terms of any sinking fund or analogous provision;
- the authorized denominations in which such debt securities will be
issuable, if other than denominations of $1,000 and any integral multiple
thereof;
- whether the amount of payments of principal of, or premium, if any, or
interest on the debt securities will be determined with reference to an
index, formula or other method, which could be based on one or more
commodities, equity indices or other indices, and how these amounts will
be determined;
- whether any such debt securities are to be issuable in registered form as
registered securities or bearer form as bearer securities or both and, if
in bearer form, the terms and conditions relating thereto and any
limitations on issuance of such bearer securities (including in exchange
for registered securities of the same series);
- whether any such debt securities will be issued in temporary or permanent
global form and, if so, the identity of the depositary for such global
debt security;
- the person to whom any interest on any registered securities of the
series shall be payable, if other than the person in whose name the
registered security (or one or more predecessor securities (i.e., every
previous debt security evidencing all or a portion of the same
indebtedness as that evidenced by such particular debt security)) is
registered at the close of business on the regular record date for such
interest, the manner in which, or the person to whom, any interest on any
bearer security of the series shall be payable, if other than upon
presentation and surrender of the coupons appertaining thereto as they
severally mature, and the extent to which, or the manner in which, any
interest payable on a temporary global debt security will be paid if
other than in the manner provided in the indenture;
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- the portion of the principal amount of such debt securities which shall
be payable upon acceleration thereof if other than the full principal
amount thereof;
- if the principal amount of the debt securities payable at maturity is not
determinable as of any date prior to such maturity, the amount which will
be deemed to be the outstanding principal amount of such debt securities;
- if other than United States dollars, the currency of payment, including
composite currencies, of the principal of, any premium or interest on or
any Additional Amounts with respect to any of such debt securities;
- whether the debt securities will be convertible into and/or exchangeable
for other securities, and, if so, the terms and conditions upon which the
debt securities will be so convertible or exchangeable;
- any deletions from, modifications of or additions to the Events of
Default or covenants with respect to the debt securities;
- whether the provisions described below under "Defeasance and Covenant
Defeasance" will be applicable to such debt securities; and
- any other terms of such debt securities.
Debt securities may be issued as original issue discount securities (i.e.,
debt securities which provide for declarations of amounts less than the
principal face amount thereof to be due and payable upon acceleration pursuant
to the indenture) to be sold at a substantial discount below their principal
amount. In the event of an acceleration of the maturity of any original issue
discount security, the amount payable to the holder thereof upon such
acceleration will be determined in the manner described in the applicable
prospectus supplement. Material federal income tax and other considerations
applicable to original issue discount securities will be described in the
applicable prospectus supplement.
Under the indentures, the terms of the debt securities of any series may
differ, and SCI, without the consent of the holders of the debt securities of
any series, may reopen a previous series of debt securities and issue additional
debt securities of such series or establish additional terms of such series.
Unless otherwise described in a prospectus supplement relating to any debt
securities, neither indenture contains any provisions that would limit SCI's
ability to incur indebtedness or that would afford holders of debt securities
protection in the event of a sudden and significant decline in the credit
quality of SCI or a takeover, recapitalization or highly leveraged or similar
transaction involving SCI. Accordingly, SCI could in the future enter into
transactions that could increase the amount of indebtedness outstanding at that
time or otherwise affect SCI's capital structure or credit rating. You should
refer to the prospectus supplement relating to a particular series of debt
securities for information regarding any deletions from, modifications of or
additions to the Events of Default described below or covenants contained in the
applicable indenture, including any addition of a covenant or other provisions
providing event risk or similar protection.
CONVERSION AND EXCHANGE
The terms, if any, on which debt securities of any series are convertible
into or exchangeable for shares of common stock, shares of preferred stock or
other securities, whether or not issued by SCI, property or cash, or a
combination of any of the foregoing,
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will be set forth in the related prospectus supplement. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holder, or at the option of SCI, in which the securities, property or cash to be
received by the holders of the debt securities would be calculated according to
the factors and at such time as described in the related prospectus supplement.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
The subordinated debt securities of each series will, to the extent set
forth in the subordinated indenture, be subordinate in right of payment to the
prior payment in full of all Senior Indebtedness with respect to such series. In
addition, the debt securities are structurally subordinated to all indebtedness
and other liabilities of our subsidiaries. Upon any payment or distribution of
assets of SCI to creditors in connection with a liquidation, dissolution,
winding-up, reorganization, assignment for the benefit of creditors, or
marshalling of assets, or any bankruptcy, insolvency or similar proceedings of
SCI (except in connection with the consolidation or merger of SCI or its
liquidation or dissolution following the conveyance, transfer or lease of its
properties and assets substantially as an entirety, upon the terms and
conditions described under "-- Consolidation, Merger and Sale of Assets"), no
payment on account of principal of, or premium, if any, or interest on or any
other amounts due on the subordinated debt securities, and no redemption,
purchase or other acquisition of the subordinated debt securities may be made
unless full payment of amounts then due on all Senior Indebtedness has been made
or duly provided for pursuant to the terms of the instruments governing the
Senior Indebtedness.
In the event that, notwithstanding the foregoing, the trustee under the
subordinated indenture or the holder of any subordinated debt security receives
any payment or distribution of assets of SCI of any kind or character (excluding
equity or subordinated securities of SCI provided for any plan of reorganization
or readjustment that, in the case of subordinated securities, are subordinated
in right of payment to all Senior Indebtedness to at least the same extent as
the subordinated debt securities are so subordinated), before all Senior
Indebtedness is paid in full, then such payment or distribution will be held in
trust for the holders of Senior Indebtedness and will be required to be paid
over or delivered forthwith to the trustee in bankruptcy or other person making
payment or distribution of assets of SCI for application to the payment of all
Senior Indebtedness remaining unpaid, to the extent necessary to pay the Senior
Indebtedness in full.
By reason of such subordination, in the event of liquidation or insolvency
of SCI, holders of Senior Indebtedness with respect to the subordinated debt
securities of any series and holders of other obligations of SCI that are not
subordinated to such Senior Indebtedness may recover more, ratably, than the
holders of the subordinated debt securities of such series.
Subject to the payment in full of all Senior Indebtedness with respect to
the subordinated debt securities of any series, the rights of the holders of the
subordinated debt securities of such series will be subrogated to the rights of
the holders of such Senior Indebtedness to receive payments or distributions of
cash, property or securities of SCI applicable to such Senior Indebtedness until
the principal of, any premium and interest on, and any additional amounts with
respect to, the subordinated debt securities of such series have been paid in
full.
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No payment of principal (including redemption and sinking fund payments) of
or any premium or interest on the subordinated debt securities of any series may
be made:
(1) if any Senior Indebtedness with respect to such series is not paid
when due and any applicable grace period with respect to such default has
ended and such default has not been cured or waived or ceased to exist; or
(2) if the maturity of any Senior Indebtedness with respect to such
series has been accelerated because of a default.
In addition, if any default occurs with respect to Designated Senior
Indebtedness (as defined below), other than a payment default on such Designated
Senior Indebtedness, giving the holders of such Designated Senior Indebtedness
the right to accelerate the maturity thereof, and SCI and the trustee under the
subordinated indenture have received written notice thereof from an authorized
person on behalf of any holder of the Designated Senior Indebtedness, then SCI
may not make any payments on account of the subordinated debt securities or on
account of the purchase or redemption or other acquisition of the subordinated
debt securities for a payment blockage period commencing on the date SCI and the
trustee receive such written notice of default and ending on the earliest of:
- 180 days from such date;
- the date, if any, on which the Designated Senior Indebtedness to which
such default relates is discharged or such default is waived or otherwise
cured; and
- the date, if any, on which such blockage period has been terminated by
written notice to SCI or the trustee under the subordinated indenture
from the person who gave the written notice of default.
Unless the holders of the Designated Senior Indebtedness or an authorized
representative of such holders accelerates the maturity of such Designated
Senior Indebtedness, SCI may resume payments on the subordinated debt securities
after the end of the 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.
The subordinated indenture does not limit or prohibit SCI from incurring
additional Senior Indebtedness, which may include Indebtedness that is senior to
the subordinated debt securities of any series, but subordinate to other
obligations of SCI. The senior debt securities will constitute Senior
Indebtedness with respect to the subordinated debt securities of each series
under the subordinated indenture.
The term "Senior Indebtedness" means, with respect to the subordinated debt
securities, the principal of, interest on and other amounts due on Indebtedness
of SCI, whether outstanding on the date of the subordinated indenture or
thereafter created, incurred, assumed or guaranteed by SCI; unless in the
instrument creating or evidencing or pursuant to which such Indebtedness is
outstanding, it is expressly provided that such Indebtedness is not senior in
right of payment to the subordinated debt securities. 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 a
petition in bankruptcy or for reorganization relating to SCI, whether or not
post-filing interest is allowed in such proceeding, at the rate specified in the
instrument governing the relevant obligation. Senior Indebtedness will not,
however, include (1) Indebtedness of or amounts owed by SCI for compensation to
employees, or for goods, services or materials purchased in the ordinary course
of business;
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(2) with certain exceptions, Indebtedness of SCI to a Subsidiary; or (3) any
liability for federal, state, local or other taxes owed by SCI.
The term "Designated Senior Indebtedness" means any Senior Indebtedness
which, at the time of determination, has an aggregate principal amount
outstanding of, or commitments to lend up to, at least $50 million and is
specifically designated by SCI in the instrument evidencing or governing such
Senior Indebtedness as "Designated Senior Indebtedness" for the purposes of the
subordinated indenture.
The subordinated indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular series of subordinated debt
securities, may be changed prior to such issuance. Any such change would be
described in the related prospectus supplement.
REGISTRATION AND TRANSFER
Unless otherwise indicated in the applicable prospectus supplement, each
series of debt securities will be issued in registered form only, without
coupons. The indentures, however, provide that SCI may also issue debt
securities in bearer form only, or in both registered and bearer form. Bearer
securities shall not be offered, sold, resold or delivered in connection with
their original issuance in the United States or to any United States person (as
defined below) other than offices located outside the United States of certain
United States financial institutions. As used herein, "United States person"
means any citizen or resident of the United States, any corporation, partnership
or other entity created or organized in or under the laws of the United States,
any estate the income of which is subject to United States federal income
taxation regardless of its source, or any trust whose administration is subject
to the primary supervision of a United States court and which has one or more
United States fiduciaries who have the authority to control all substantial
decisions of the trust, and "United States" means, except as may be set forth in
the prospectus supplement, the United States of America (including the states
thereof and the District of Columbia), its territories, its possessions and
other areas subject to its jurisdiction. Purchasers of bearer securities will be
subject to certification procedures and may be affected by certain limitations
under United States tax laws. Such procedures and limitations will be described
in the prospectus supplement relating to the offering of the bearer securities.
Unless otherwise indicated in the applicable prospectus supplement,
registered securities will be issued in denominations of $1,000 or any integral
multiple thereof.
Unless otherwise indicated in the applicable prospectus supplement, debt
securities may be surrendered for registration of transfer or exchange at an
office or agency to be maintained by SCI in the Borough of Manhattan, The City
of New York. No service charge shall be made for any registration of transfer or
exchange of debt securities, but SCI may require payment of a sum sufficient to
cover any tax or other governmental charge and any other expenses that may be
imposed in connection therewith.
Unless otherwise indicated in the applicable prospectus supplement, SCI
will not be required to do the following:
- issue, register the transfer of or exchange debt securities of any series
during a period beginning at the opening of business 15 days before any
selection of debt securities of that series of like tenor to be redeemed
and ending at the close of business on the day of giving notice of such
redemption;
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- register the transfer of or exchange any registered security, or portion
thereof, called for redemption, except the unredeemed portion of any
registered security being redeemed in part;
- exchange any bearer security called for redemption, except to exchange
such bearer security for a registered security of that series and like
tenor that is simultaneously surrendered for redemption; or
- issue, register the transfer of or exchange any debt security that has
been surrendered for repayment at the option of the holder, except the
portion, if any, of such debt security not to be so repaid.
PAYMENT MECHANICS
If interest is due on a debt security on an interest payment date, we will
pay the interest to the person or entity in whose name the debt security is
registered at the close of business on the regular record date (see below)
relating to the interest payment date. If interest is due at maturity but on a
day that is not an interest payment date, we will pay the interest to the person
or entity entitled to receive the principal of the debt security. If principal
or another amount besides interest is due on a debt security at maturity, we
will pay the amount to the holder of the debt security against surrender of the
debt security at a proper place of payment, or in the case of a global security,
in accordance with the applicable policies of the depositary.
PAYMENTS ON GLOBAL SECURITIES. SCI will make payments on a global security
in accordance with the applicable policies of the depositary as in effect from
time to time. Under those policies, SCI will pay directly to the depositary, or
its nominee, and not to any indirect holders who own beneficial interests in the
global security. An indirect holder's right to those payments will be governed
by the rules and practices of the depositary and its participants, as described
under "Legal Ownership of Securities -- Global Securities."
PAYMENTS ON NON-GLOBAL SECURITIES. We will pay interest that is due on an
interest payment date with respect to non-global securities by check mailed on
the interest payment date to the holder at his or her address shown on the
trustee's records as of the close of business on the regular record date. We
will make all other payments by check at the paying agent described below,
against surrender of the debt security. All payments by check will be made in
next-day funds, that is, funds that become available on the day after the check
is cashed.
Alternatively, if a non-global security has a face amount of at least $1
million, and the holder asks SCI to do so, SCI will pay any amount that becomes
due on the debt security by wire transfer of immediately available funds to an
account at a bank in New York City, on the due date. To request wire payment,
the holder must give the paying agent appropriate transfer instructions at least
five business days before the requested wire payment is due. In the case of any
interest payment due on an interest payment date, the instructions must be given
by the person who is the holder on the relevant regular record date. In the case
of any other payment, payment will be made only after the debt security is
surrendered to the paying agent. Any wire instructions, once properly given,
will remain in effect unless and until new instructions are given in the manner
described below.
REGULAR RECORD DATES. SCI will pay interest to the holders listed on the
trustee's records as the owners of the debt securities at the close of business
on a particular day in advance of each interest payment date. Interest will be
paid to these holders if they are listed
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as the owner even if they no longer own the debt security on the interest
payment date. That particular day, usually about two weeks in advance of the
interest payment date, is called the regular record date and will be identified
in the applicable prospectus supplement.
PAYMENT WHEN OFFICES ARE CLOSED. If any payment is due on a debt security
on a day that is not a business day, SCI will make the payment on the next day
that is a business day. Payments postponed to the next business day in this
situation will be treated under the indenture as if they were made on the
original due date. A postponement of this kind will not result in a default
under any debt security or the indenture, and no interest will accrue on the
postponed amount from the original due date to the next day that is a business
day.
PAYING AGENTS. SCI may appoint one or more financial institutions to act
as its paying agents, at whose designated offices debt securities in non-global
form may be surrendered for payment at their maturity. SCI calls each of these
offices a paying agent. SCI may add, replace or terminate paying agents from
time to time and may also choose to act as its own paying agent. Initially, SCI
will appoint the trustee for each series of debt securities, at its corporate
trust office in New York City, as the paying agent for such series.
BEARER SECURITIES. Unless otherwise indicated in the applicable prospectus
supplement, payment of principal of, premium, if any, and interest, if any, on
bearer securities will be made, subject to any applicable laws and regulations,
at such office or agency outside the United States as specified in the
prospectus supplement and as SCI may designate from time to time. Unless
otherwise indicated in the applicable prospectus supplement, payment of interest
due on bearer securities on any interest payment date will be made only against
surrender of the coupon relating to such interest payment date.
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT WITH THEIR BANKS OR
BROKERS FOR INFORMATION ON HOW THEY WILL RECEIVE PAYMENTS ON THEIR DEBT
SECURITIES.
REDEMPTION AND REPURCHASE
The debt securities of any series may be redeemable at the option of SCI,
may be subject to mandatory redemption pursuant to a sinking fund or otherwise,
or may be subject to repurchase by SCI at the option of the holders, in each
case upon the terms, at the times and at the prices set forth in the applicable
prospectus supplement.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Each indenture restricts SCI's ability to, among other things:
- consolidate;
- merge; or
- transfer or lease substantially all of its assets.
SCI will not consolidate with or merge with or into any other person or,
directly or indirectly, sell, assign, transfer, lease or otherwise convey all or
substantially all its properties and assets substantially as an entirety,
unless:
(a) Either (1) SCI is the surviving corporation or (2) the Person, if
other than SCI, formed by such consolidation or into which SCI is merged or
the Person that acquires by sale, assignment, transfer, lease or other
disposition the properties and assets of SCI
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substantially as an entirety (A) is a corporation, partnership or trust
organized and validly existing under the laws of the United States, any
state thereof or the District of Columbia and (B) expressly assumes, by a
supplemental indenture in form satisfactory to the trustee under each
indenture, all of SCI's obligations under such indenture and the debt
securities;
(b) the sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of our properties or assets shall
be as an entirety or virtually as an entirety to one corporation and the
corporation assumes all obligations, pursuant to a supplemental indenture
in a form reasonably satisfactory to the trustee, under the debt securities
and the indenture;
(c) Immediately after giving effect to such transaction, no default or
event of default under the indenture has occurred and is continuing; and
(d) SCI delivers, or causes to be delivered, to the trustee under each
indenture, in form and substance reasonably satisfactory to the trustee
under such indenture, an officers' certificate and an opinion of counsel,
each stating that such transaction complies with the requirements of the
indenture.
EVENTS OF DEFAULT
Unless otherwise specified in the applicable prospectus supplement, an
Event of Default with respect to the debt securities of any series is defined in
the applicable indenture as being:
1. default in the payment of any interest on any debt security of such
series when such interest becomes due and payable, and continuance of such
default for a period of 30 days;
2. default in payment of principal or any premium with respect to any
debt security of such series when due;
3. default in making any sinking fund payment or payment under any
analogous provision when due with respect to any debt security of such
series;
4. default by SCI in the performance, or breach, of any other covenant
or warranty in the indenture (other than a covenant or warranty included
therein solely for the benefit of one or more series of debt securities
other than that series) of any debt security of such series which shall not
have been remedied for a period of 60 days after delivery of written notice
to SCI by the trustee or to SCI and the trustee by the holders of not less
than 25% in aggregate principal amount of the debt securities of such
series then outstanding;
5. there occurs with respect to any issue or issues of Indebtedness of
SCI (including an Event of Default under any other series of debt
securities) or any Restricted Subsidiary having an outstanding principal
amount of $50 million or more in the aggregate for all such issues of all
such Persons, whether such Indebtedness exists on the date of the indenture
or created after such date:
(a) an event of default that has resulted in such Indebtedness
becoming due and payable prior to its stated maturity and such
Indebtedness shall not have been discharged in full or such acceleration
shall not have been rescinded or annulled and/or
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(b) the failure to pay when due principal of or interest on such
Indebtedness within the grace period provided for in such Indebtedness
(which failure continues beyond any applicable grace period);
6. SCI or any of its Restricted Subsidiaries shall fail within 60 days
to pay, bond or otherwise discharge judgements or court orders for the
payment of money the uninsured portion of which exceeds $50 million in the
aggregate, which are not stayed on appeal or are not otherwise being
appropriately contested in good faith;
7. certain events of bankruptcy, insolvency, reorganization, winding
up or liquidation of SCI or any of its Restricted Subsidiaries; or
8. any other Event of Default established in or pursuant to the
applicable indenture for the debt securities of such series.
No Event of Default with respect to any particular series of debt
securities necessarily constitutes an Event of Default with respect to any other
series of debt securities. Each indenture provides that the trustee thereunder
may withhold notice to the holders of the debt securities of any series of the
occurrence of a default with respect to the debt securities of such series
(except a default in payment of principal, premium, if any, interest, if any, or
sinking fund payments, if any) if the trustee considers it in the interest of
the holders to do so.
Each indenture provides that if an Event of Default with respect to any
series of debt securities of the type described in clause (7) with respect to
SCI shall have occurred and be continuing, then the principal of, and accrued
and unpaid interest on, the debt securities of such series will become
immediately due and payable. Each indenture provides that if any other Event of
Default with respect to any series of debt securities issued thereunder shall
have occurred and be continuing, either the trustee or the holders of at least
25% in principal amount of the debt securities of such series then outstanding
may declare the principal amount (or if any debt securities of such series are
original issue discount securities, such lesser amount as may be specified in
the terms thereof) of all the debt securities of such series to be due and
payable immediately. Upon certain conditions such declaration and its
consequences may be rescinded and annulled by the holders of a majority in
principal amount of the debt securities of such series then outstanding except:
- in the case of a continuing default or Event of Default in the payment of
or interest on, or the principal of or premium on, the debt securities of
such series; or
- in respect of any covenant or provision of the applicable indenture or
debt securities which cannot be modified or amended without the consent
of the holder of each debt security affected.
Subject to the provisions of the Trust Indenture Act requiring the trustee,
during an Event of Default under the applicable indenture, to act with the
requisite standard of care, the trustee is under no obligation to exercise any
of its rights or powers under the applicable indenture at the request or
direction of any of the holders of debt securities of any series unless such
holders have offered the trustee reasonable indemnity. Subject to the foregoing,
holders of a majority in principal amount of the then outstanding debt
securities of any series issued under the applicable indenture shall have the
right, subject to certain limitations, to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee under the
indenture with respect to such series. Each indenture requires the annual filing
with the trustee of a certificate by SCI as to whether or not it is in default
under the
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terms of the indenture, and we are required, upon becoming aware of any default
or Event of Default, to deliver to the trustee for the applicable series of
securities a statement describing the default or Event of Default.
Notwithstanding any other provision of the indentures, the holder of any
debt security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and premium, if any, and interest, if any,
on such debt security on the respective due dates therefor (as the same may be
extended in accordance with the terms of such debt security) and to institute
suit for enforcement of any such payment, and such right shall not be impaired
without the consent of such holder.
CERTAIN DEFINITIONS
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have means correlative to the
foregoing.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, partnership interests, participation rights in or other equivalents
(however designated) of such Person's equity (however designated).
"Consolidated Subsidiaries" means, at any date, any Subsidiary or other
entity whose accounts would be consolidated with those of SCI in its
consolidated financial statements if such statements were prepared as of such
date.
"GAAP" means Generally Accepted Accounting Principles as in effect from
time to time, applied on a basis consistent (except for changes concurred in by
SCI's independent public accountants) with the most recent audited consolidated
financial statements of SCI and its Consolidated Subsidiaries.
"Hedging Obligations" means the obligations of any Person under interest
rate swap agreements, interest rate agreements, interest rate collar agreements
or other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or the value of foreign currencies.
"Indebtedness" means (without duplication) (a) any liability of SCI or any
Subsidiary (1) for borrowed money, or under any reimbursement obligation
relating to a letter of credit, or (2) evidenced by a bond, note, debenture or
similar instrument, or (3) for payment obligations arising under any conditional
sale or other title retention arrangement (including a purchase money
obligation) given in connection with the acquisition of any businesses,
properties or assets of any kind, or (4) consisting of the discounted rental
stream properly classified in accordance with GAAP on the balance sheet of SCI
or any Subsidiary, as lessee, as a capitalized lease obligation, or (5) under
Hedging Obligations; (b) any liability of others of a type described in the
preceding clause (a) to the extent that SCI or any Subsidiary has guaranteed or
is otherwise legally obligated in respect thereof; and (c) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (a) and (b) above. "Indebtedness"
shall not be construed to include (x) trade payables or credit on open account
to trade creditors incurred in the ordinary course of business or (y)
obligations or liabilities incurred in connection with the
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sale, transfer or other disposition of property in connection with the
securitization or other asset-based financing thereof; provided however that any
such sale, transfer or other disposition shall be for valid consideration and
shall not be to prefer directly or indirectly any holder of any other obligation
or Indebtedness of SCI or any Subsidiary of SCI as to any such other obligation
or Indebtedness that was already outstanding and did not previously benefit from
a Lien.
"Lien" means, with respect to any asset, any pledge, mortgage, charge,
encumbrance or security interest in respect of such asset; provided that any
transaction (including, without limitation, any sale of accounts receivable)
which is treated as a sale of assets under GAAP shall be so treated and any
asset which is so sold shall not be deemed subject to a Lien. Pursuant to the
indenture, a contractual grant of a right of set-off does not create a Lien in
the absence of an agreement to maintain a balance against which such right may
be exercised.
"Person" means any individual, corporation, partnership, joint venture,
joint-stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Restricted Subsidiary" means, at any time, each and every Subsidiary which
is a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under
the Securities Act of 1933 and the Securities Exchange Act of 1934 (as currently
in effect).
"Subsidiary" means any corporation, association or other business entity of
which at the time of determination SCI or one or more Subsidiaries owns or
controls more than 50% of the shares of Voting Stock.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes has, or might have, voting power by reason of the
happening of any contingency).
DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable prospectus supplement, SCI
may, at its option and at any time, terminate its obligations with respect to
the debt securities of a particular series and some of the covenants in each
indenture ("defeasance"), subject to the exceptions set forth below. Such
defeasance means that SCI will be deemed to have paid and discharged the entire
Indebtedness represented by the then outstanding debt securities of the
particular series, except for:
- the rights of holders of then outstanding debt securities of the series
to receive payments in respect of the principal of, and premium, if any,
on, and interest on the debt securities when such payments are due;
- SCI's obligations to issue temporary debt securities, register the
transfer or exchange of any debt securities, replace mutilated,
destroyed, lost or stolen debt securities, maintain an office or agency
for payments in respect of the debt securities and segregate and hold
such payments in trust;
- the rights, powers, trusts, duties and immunities of the trustee under
the indenture; and
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- the defeasance provisions of the applicable indenture.
In addition, unless otherwise indicated in the applicable prospectus
supplement, SCI may, at its option and at any time, elect to terminate its
obligations with respect to certain covenants set forth in each indenture and
any omission to comply with such obligations would not constitute a default or
an event of default with respect to the debt securities ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance,
- SCI must irrevocably deposit or cause to be deposited with the applicable
trustee, as trust funds in trust, specifically pledged as security for,
and dedicated solely to, the benefit of the holders of the debt
securities of a particular series, money (in U.S. dollars or in the
Foreign Currency in which such debt securities are payable) in an amount,
or Government Obligations (as defined below) that through the scheduled
payment of principal and interest thereon will provide money in an
amount, or a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accounts, to pay and
discharge the principal of, and premium, if any, on, and interest on the
then outstanding debt securities of that series at maturity, or upon
redemption, if applicable, of such principal or installment of interest;
- no default or event of default has occurred and is continuing on the date
of such deposit or, insofar as an event of bankruptcy under clause (7) of
"Events of Default" above is concerned, at any time during the period
ending on the 91st day after the date of such deposit;
- such defeasance or covenant defeasance must not result in a breach or
violation of, or constitute a default under, the indenture or any
material agreement or instrument to which SCI is a party or by which it
is bound or cause the applicable trustee or the trust so created to be
subject to the Investment Company Act of 1940, as amended;
- in the case of defeasance, SCI must deliver to the applicable trustee an
opinion of counsel stating that SCI has received from, or there has been
published by, the Internal Revenue Service a ruling, or since the date
hereof, there has been a change in applicable federal income tax law, to
the effect, and based thereon such opinion must confirm that, the holders
of the outstanding debt securities will not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
defeasance had not occurred;
- in the case of covenant defeasance, SCI must have delivered to the
applicable trustee an opinion of counsel to the effect that the holders
of the debt securities outstanding will not recognize income, gain or
loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred; and
- SCI must have delivered to the applicable trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with.
"Foreign Currency" means any currency, currency unit or composite currency,
including, without limitation, the euro, issued by the government of one or more
countries
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other than the United States of America or by any regional confederation or
association of such governments.
"Government Obligations" means debt securities which are (1) direct
obligations of the United States of America or the other government or
governments in the confederation which issued the Foreign Currency in which the
principal of or any premium or interest on such debt securities or any
Additional Amounts in respect thereof shall be payable, in each case where the
payment or payments thereunder are supported by the full faith and credit of
such government or governments or (2) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America or such other government or governments, in each case where the timely
payment or payments thereunder are unconditionally guaranteed as a full faith
and credit obligation by the United States of America or such other government
or governments. In either case, such obligations may not be callable or
redeemable at the option of the issuer or issuers thereof. Such obligations may
also include a depository receipt issued by a bank or trust company as custodian
with respect to any such Government Obligation or a specific payment of interest
on or principal of or other amount with respect to any such Government
Obligation held by such custodian for the account of the holder of a depository
receipt, provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
Government Obligation or the specific payment of interest on or principal of or
other amount with respect to the Government Obligation evidenced by such
depository receipt.
SATISFACTION AND DISCHARGE
The indenture will cease to be of further effect, except as to surviving
rights of registration of transfer or exchange of the debt securities, as
expressly provided for in each indenture, and, upon the request of SCI, the
trustee under each indenture, at the expense of SCI, will execute proper
instruments acknowledging satisfaction and discharge of the indenture when:
(a) either:
(1) all the debt securities theretofore authenticated and delivered
under the indenture, other than destroyed, lost or stolen debt
securities that have been replaced or paid and debt securities that have
been subject to defeasance as described under "Defeasance or Covenant
Defeasance" above have been delivered to the trust under the indenture
for cancellation; or
(2) all debt securities not theretofore delivered to the trust
under the indenture for cancellation:
(A) have become due and payable;
(B) will become due and payable at their maturity within one
year; or
(C) are to be called for redemption within one year under
arrangements satisfactory to the trustee under the indenture for
the giving of notice of redemption by the trustee under the
indenture in the name, and at the expense, of SCI;
and SCI has irrevocably deposited or caused to be deposited with the
trustee under the applicable indenture funds in trust for the purpose in an
amount sufficient to pay and
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discharge the entire Indebtedness on such debt securities not theretofore
delivered to the trust under the indenture for cancellation, for principal,
and premium, if any, on, and interest to the date of such deposit, in the
case of debt securities that have become due and payable, or to the
maturity or redemption date, as the case may be;
(b) SCI has paid or caused to be paid all sums payable under the
indenture by SCI; and
(c) SCI has delivered to the trustee under the indenture an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided in the indenture relating to the satisfaction and
discharge of the indenture have been complied with.
Certain additional provisions of the indenture will continue in effect
following any satisfaction and discharge pursuant to section (a)(2)(B) or (C)
above, including provisions regarding conversion rights, if any, under the debt
securities.
AMENDMENTS AND WAIVERS
Modifications and amendments of each indenture may be made by SCI and the
applicable trustee with the consent of the holders of a majority in aggregate
outstanding principal amount of the debt securities of each series affected by
the modification; provided, however, that no such modification or amendment may,
without the consent of the holder of each outstanding debt security affected
thereby:
(a) change the maturity of the principal of, or any installment of
interest on, any debt security, or reduce the principal amount thereof or
the rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where or change the coin or
currency in which, any debt security or any premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment after the maturity thereof, or, in the case of redemption, on
or after the redemption date;
(b) reduce the percentage in principal amount of outstanding debt
securities of any series, the consent of whose holders is required for any
amendment or for any waiver of compliance with certain provisions of, or
certain defaults and their consequences provided for under the indenture;
(c) modify any of the provisions of the applicable indenture relating
to the subordination of the debt securities in a manner materially adverse
to the holders; or
(d) waive a default in the payment of principal of, or premium, if
any, or interest on the debt securities of any series or reduce the
percentage or of the aggregate principal amount of outstanding debt
securities of any series the consent of whose holders is necessary for
waiver of compliance with certain provisions of the indenture or for waiver
of certain defaults.
The holders of a majority in aggregate principal amount of the debt
securities of any series outstanding may waive compliance with certain
restrictive covenants and provisions of the indenture with respect to that
series of debt securities.
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Without the consent of any holders, SCI and the trustee under the
indenture, at any time and from time to time, may enter into one or more
indentures supplemental to the indenture governing the debt securities for any
of the following purposes:
(a) to evidence the succession of another person to SCI and the
assumption by any such successor of the covenants of SCI in the indenture
and in the debt securities;
(b) to add to the covenants of SCI for the benefit of the holders, or
to surrender any right or power conferred upon SCI under the indenture;
(c) to add additional Events of Default;
(d) to establish the form or terms of Securities of any series;
(e) to evidence and provide for the acceptance of appointment under
the indenture by a successor trustee under the indenture;
(f) to secure the debt securities;
(g) to cure any ambiguity, defect or inconsistency in a manner that
does not adversely affect the interests of the holders in any material
respect;
(h) to comply with any requirements of the SEC in order to effect and
maintain the qualification of the indenture under the Trust Indenture Act;
or
(i) to make any other change that does not adversely effect the rights
of any holder.
OUTSTANDING DEBT SECURITIES
In determining whether the holders of the requisite principal amount of
outstanding debt securities have given any request, demand, authorization,
direction, notice, consent or waiver under the applicable indenture:
- the portion of the principal amount of an original issue discount
security that shall be deemed to be outstanding for such purposes shall
be that portion of the principal amount thereof that could be declared to
be due and payable upon a declaration of acceleration thereof pursuant to
the terms of such original issue discount security as of the date of such
determination;
- the principal amount of any Indexed Security (i.e. a security the terms
of which provide that the principal amount payable at maturity may be
more or less than the principal face amount at original issuance), that
shall be deemed to be outstanding for such purpose shall be the principal
face amount of such Indexed Security determined on the date of its
original issuance; and
- any debt security owned by SCI or any obligor on such debt security or
any Affiliate of SCI or such other obligor shall be deemed not to be
outstanding.
GOVERNING LAW
The indentures and the debt securities will be governed by, and construed
in accordance with, the laws of the State of New York.
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REGARDING THE TRUSTEES
The Trust Indenture Act contains limitations on the rights of a trustee,
should it become a creditor of SCI, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claims,
as security or otherwise. Each trustee is permitted to engage in other
transactions with SCI and its subsidiaries from time to time, provided that if
the trustee acquires any conflicting interest it must eliminate such conflict
upon the occurrence of an Event of Default under the applicable indenture, or
else resign.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 200,500,000 shares. Those shares
consist of (1) 200,000,000 shares designated as common stock, $0.10 par value
per share, and (2) 500,000 shares designated as preferred stock, no par value
per share. The only equity securities currently outstanding are shares of common
stock. As of January 17, 2000, there were 72,372,137 shares of common stock
issued and outstanding.
COMMON STOCK
Our common stock is listed on the New York Stock Exchange under the symbol
"SCI." Holders of common stock are entitled to receive dividends declared by the
Board of Directors, out of funds legally available for the payment of dividends,
subject to the rights of holders of preferred stock and subject to certain
financial covenants contained in our loan agreements. Currently, we are not
paying a dividend. Each holder of common stock is entitled to one vote per
share. 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. Upon any liquidation,
dissolution or winding up of our business, the holders of common stock are
entitled to share equally in all assets available for distribution after payment
of all liabilities and provision for liquidation preference of shares of
preferred stock then outstanding. The holders of common stock have no preemptive
rights and no rights to convert their common stock into any other securities.
There are also no redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of common stock are fully paid and nonassessable.
PREFERRED STOCK
The following description of preferred stock and the description of the
terms of a particular series of preferred stock that will be set forth in the
related prospectus supplement are not complete. These descriptions are qualified
in their entirety by reference to the certificate of designation relating to
that series. The rights, preferences, privileges and restrictions of the
preferred stock of each series will be fixed by the certificate of designation
relating to that series. The prospectus supplement also will contain a
description of certain United States federal income tax consequences relating to
the purchase and ownership of the series of preferred stock that is described in
the prospectus supplement.
Each holder of preferred stock is entitled to one vote per share of
preferred stock. The Board of Directors has the authority, without further
action by the stockholders, to issue up to 500,000 shares of preferred stock in
one or more series and to fix the following terms of the preferred stock which
will be specified in the prospectus supplement relating to preferred stock. As
of January 24, 2000, there were no shares of preferred stock outstanding.
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The prospectus supplement will specify as to each issuance of preferred
stock:
- the maximum number of shares;
- the designation of the shares;
- the annual dividend rate, if any, whether the dividend rate is fixed or
variable, the date dividends will accrue, the dividend payment dates and
whether dividends will be cumulative;
- the price and the terms and conditions for redemption, if any, including
redemption at our option or at the option of the holders, including the
time period for redemption, and any accumulated dividends or premiums;
- the liquidation preference, if any, and any accumulated dividends upon
the liquidation, dissolution or winding up of SCI's affairs;
- any sinking fund or similar provision, and, if so, the terms and
provisions relating to the purpose and operation of the fund;
- the terms and conditions, if any, for conversion or exchange of shares
into or for any other class or classes of our capital stock or any series
of any other class or classes, or into or for any other series of the
same class, or any other securities or assets, including the price or the
rate of conversion or exchange and the method, if any, of adjustment; and
- any or all other preferences and relative, participating, optional or
other special rights, privileges or qualifications, limitations or
restrictions.
Preferred stock will be fully paid and nonassessable upon issuance. The
preferred stock or any series of preferred stock may be represented, in whole or
in part, by one or more global certificates, which will represent an aggregate
number of shares equal to that of the preferred stock represented by the global
certificate.
Each global certificate will:
- be registered in the name of a depositary or a nominee of the depositary
identified in the prospectus supplement;
- be deposited with such depositary or nominee or a custodian for the
depositary; and
- bear a legend regarding any restrictions on exchanges and registration of
transfer and any other matters as may be provided for under the
certificate of designation.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
SCI may elect to offer depositary shares, each representing a fraction (to
be set forth in the prospectus supplement relating to a particular series of
shares of preferred stock) of a share of a particular series of shares of
preferred stock as described below. In the event SCI elects to do so, depositary
receipts evidencing depositary shares will be issued to the public.
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The shares of any class or series of shares of preferred stock represented
by depositary shares will be deposited under a deposit agreement among SCI, a
depositary selected by SCI and the holders of the depositary receipts. The
depositary will be a bank or trust company having its principal office in the
United States and having a combined capital and surplus of at least $50,000,000.
Subject to the terms of the deposit agreement, each owner of a depositary share
will be entitled, in proportion to the applicable fraction of a preferred share
represented by such depositary share, to all the rights and preferences of the
shares of preferred stock represented thereby (including dividend, voting,
redemption and liquidation rights).
The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement. Depositary receipts will be distributed to
those persons purchasing the fractional shares of the related class or series of
shares of preferred stock in accordance with the terms of the offering described
in the related prospectus supplement. Copies of the forms of deposit agreement
and depositary receipt will be filed as exhibits to or incorporated by reference
in the registration statement of which this prospectus forms a part, and the
following summary is qualified in its entirety by reference to such exhibits.
Pending the preparation of definitive depositary receipts, the depositary
may, upon the written order of SCI, issue temporary depositary receipts
substantially identical to (and entitling the holders thereof to all the rights
pertaining to) the definitive depositary receipts but not in definitive form.
Definitive depositary receipts will be prepared thereafter without unreasonable
delay, and temporary depositary receipts will be exchangeable for definitive
depositary receipts without charge to the holder thereof.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other distributions
received in respect of the related class or series of shares of preferred stock
to the record holders of depositary shares relating to such class or series of
shares of preferred stock in proportion to the number of such depositary shares
owned by such holders.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary shares
entitled thereto, unless the depositary determines that it is not feasible to
make such distribution, in which case the depositary may, with the approval of
SCI, sell such property and distribute the net proceeds from such sale to such
holders.
WITHDRAWAL OF SHARES
Upon surrender of the depositary receipts at the corporate trust office of
the depositary (unless the related depositary shares have previously been called
for redemption), the holder of the depositary shares evidenced thereby is
entitled to delivery of the number of whole shares of the related class or
series of shares of preferred stock and any money or other property represented
by such depositary shares. Holders of depositary shares will be entitled to
receive whole shares of the related class or series of shares of preferred stock
on the basis set forth in the prospectus supplement for such class or series of
shares of preferred stock, but holders of such whole shares of preferred stock
will not thereafter be entitled to exchange them for depositary shares. If the
depositary receipts delivered by the holder evidence a number of depositary
shares in excess of the number of depositary shares representing the number of
whole shares of preferred stock to be withdrawn, the depositary will deliver to
such holder at the same time a new depositary receipt evidencing such excess
number of
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depositary shares. In no event will fractional shares of preferred stock be
delivered upon surrender of depositary receipts to the depositary.
REDEMPTION OF DEPOSITARY SHARES
Whenever SCI redeems shares of preferred stock held by the depositary, the
depositary will redeem as of the same redemption date the number of depositary
shares representing shares of the related class or series of shares of preferred
stock so redeemed. The redemption price per depositary share will be equal to
the applicable fraction of the redemption price per share payable with respect
to such class or series of shares of preferred stock. If less than all the
depositary shares are to be redeemed, the depositary shares to be redeemed will
be selected by lot or pro rata as may be determined by the depositary.
VOTING THE SHARES OF PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the shares of
preferred stock are entitled to vote, the depositary will mail the information
contained in such notice of meeting to the record holders of the depositary
shares relating to such shares of preferred stock. Each record holder of such
depositary shares on the record date (which will be the same date as the record
date for the shares of preferred stock) will be entitled to instruct the
depositary as to the exercise of the voting rights pertaining to the amount of
the class or series of shares of preferred stock represented by such holder's
depositary shares. The depositary will endeavor, insofar as practicable, to vote
the number of shares of preferred stock represented by such depositary shares in
accordance with such instructions, and SCI will agree to take all action which
the depositary deems necessary in order to enable the depositary to do so. The
depositary will abstain from voting shares of preferred stock to the extent it
does not receive specific instructions from the holders of depositary shares
representing such shares of preferred stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may at any time be amended by agreement
between SCI and the depositary. However, any amendment which materially and
adversely alters the rights of the holders of depositary receipts will not be
effective unless such amendment has been approved by the holders of depositary
receipts representing at least a majority (or, in the case of amendments
relating to or affecting rights to receive dividends or distributions or voting
or redemption rights, 66%, unless otherwise provided in the related prospectus
supplement) of the depositary shares then outstanding. The deposit agreement may
be terminated by SCI or the depositary only (1) if all outstanding depositary
shares have been redeemed, (2) if there has been a final distribution in respect
of the related class or series of shares of preferred stock in connection with
any liquidation, dissolution or winding up of SCI and such distribution has been
distributed to the holders of depositary receipts or (3) upon the consent of
holders of depositary receipts representing not less than 66% of the depositary
shares outstanding.
CHARGES OF DEPOSITARY
SCI will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. SCI will pay charges
of the depositary in connection with the initial deposit of the related class or
series of shares of preferred stock
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and any redemption of such shares of preferred stock. Holders of depositary
receipts will pay all other transfer and other taxes and governmental charges
and such other charges as are expressly provided in the deposit agreement to be
for their accounts.
The depositary may refuse to effect any transfer of a depositary receipt or
any withdrawal of shares of a class or series of preferred stock evidenced
thereby until all taxes and charges with respect to the depositary receipt or
shares of preferred stock are paid by the holders thereof.
MISCELLANEOUS
The depositary will forward all reports and communications from SCI which
are delivered to the depositary and which SCI is required to furnish to the
holders of the shares of preferred stock.
Neither the depositary nor SCI will be liable if it is prevented or delayed
by law or any circumstance beyond its control in performing its obligations
under the deposit agreement. The obligations of SCI and the depositary under the
deposit agreement will be limited to performance in good faith of their duties
thereunder, and neither SCI nor the depositary will be obligated to prosecute or
defend any legal proceeding in respect of any depositary shares or class or
series of shares of preferred stock unless satisfactory indemnity is furnished.
SCI and the depositary may rely on written advice of counsel or accountants, or
information provided by persons presenting shares of preferred stock for
deposit, holders of depositary shares or other persons believed to be competent
and on the documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering to SCI notice of its
election to do so, and SCI may at any time remove the depositary. Any such
resignation or removal of the depositary will take effect upon the appointment
of a successor depositary, which successor must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
DESCRIPTION OF WARRANTS
SCI has no warrants outstanding (other than options issued under its
employee stock option plans). SCI may issue warrants for the purchase of debt
securities, common stock or preferred stock. Warrants may be issued
independently or together with any other securities offered by any prospectus
supplement and may be attached to or separate from such securities. Each series
of warrants will be issued under a separate warrant agreement to be entered into
between SCI and a warrant agent specified in the applicable prospectus
supplement. The warrant agent will act solely as an agent of SCI in connection
with the warrants of such series and will not assume any obligation or
relationship of agency or trust for or with any holders of the warrants. Further
terms of the warrants and the applicable warrant agreements will be set forth in
the applicable prospectus supplement. Copies of the form of warrant agreement
and warrant will be filed as exhibits to or incorporated by reference in the
registration statement of which this prospectus forms a part, and the following
summary is qualified in its entirety by reference to such exhibits.
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The applicable prospectus supplement will describe the terms of the
warrants, including, where applicable, the following:
- the title of the warrants;
- the aggregate number of warrants;
- the price or prices at which warrants will be issued;
- the designation, terms and number of securities purchasable upon exercise
of warrants;
- the designation and terms of the securities, if any, with which warrants
are issued and the number of warrants issued with each security;
- the date, if any, on and after which warrants and the related securities
will be separately transferable;
- the price at which each security purchasable upon exercise of warrants
may be purchased;
- the date on which the right to exercise the warrants shall commence and
the date on which that right shall expire;
- the minimum or maximum amount of warrants which may be exercised at any
one time;
- information with respect to book-entry procedures, if any; and
- any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
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PLAN OF DISTRIBUTION
We may offer and sell the securities directly, to or through underwriting
syndicates represented by managing underwriters, to or through underwriters
without a syndicate or through dealers or agents. The prospectus supplement with
respect to the offered securities will set forth the terms of the offering,
including the following:
- the name or names of any underwriters, dealers or agents;
- the purchase price and the proceeds we will receive from the sale;
- any underwriting discounts, agency fees and other items constituting
underwriters' or agents' compensation; and
- the initial public offering price and any discounts or concessions
allowed, re-allowed or paid to dealers.
If any underwriters are involved in the offer and sale, the securities will
be acquired by the underwriters and may be resold by them, either at a fixed
public offering price established at the time of offering or from time to time
in one or more negotiated transactions or otherwise, at prices related to
prevailing market prices determined at the time of sale. Unless otherwise set
forth in the applicable prospectus supplement, the obligations of the
underwriters to purchase the securities will be subject to conditions precedent
and the underwriters will be obligated to purchase all the securities described
in the prospectus supplement if any are purchased. Any initial public offering
price and any discounts or concessions allowed or re-allowed or paid to dealers
may be changed from time to time.
We may offer and sell the securities directly or through an agent or agents
designated by us from time to time. An agent may sell securities it has
purchased from us as principal to other dealers for resale to investors and
other purchasers, and may reallow all or any portion of the discount received in
connection with the purchase from us to the dealers. After the initial offering
of the securities, the offering price (in the case of securities to be resold at
a fixed offering price), the concession and the discount may be changed. Any
agent participating in the distribution of the securities may be deemed to be an
"underwriter," as that term is defined in the Securities Act of 1933, of the
securities so offered and sold.
If any underwriters are involved in the offer and sale, they will be
permitted to engage in transactions that maintain or otherwise affect the price
of the securities. These transactions may include over-allotment transactions,
purchases to cover short positions created by the underwriter in connection with
the offering and the imposition of penalty bids. If an underwriter creates a
short position in the securities in connection with the offering, i.e., if it
sells more securities than set forth on the cover page of the applicable
prospectus supplement, the underwriter may reduce that short position by
purchasing the securities in the open market. In general, purchases of a
security to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases. As noted above,
underwriters may also choose to impose penalty bids on other underwriters and/or
selling group members. This means that if underwriters purchase securities on
the open market to reduce their short position or to stabilize the price of the
securities, they may reclaim the amount of the selling concession from those
underwriters and/or selling group members who sold such securities as part of
the offering.
Neither we nor any underwriter make any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the
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securities. In addition, neither we nor any underwriter make any representation
that such underwriter will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
Underwriters, dealers and agents may be entitled, under agreements entered
into with us, to indemnification by us against some liabilities, including
liabilities under the Securities Act of 1933.
The place and time of delivery for the securities in respect of which this
prospectus is delivered will be set forth in the applicable prospectus
supplement if appropriate.
Unless otherwise indicated in the prospectus supplement, each series of
offered securities will be a new issue of securities and, other than the common
stock, which is listed on the NYSE, for which there currently is no market. Any
underwriters to whom securities are sold for public offering and sale may make a
market in such series of securities as permitted by applicable laws and
regulations, but such underwriters will not be obligated to do so, and any such
market making may be discontinued at any time without notice. Accordingly, there
can be no assurance as to the development or liquidity of any market for the
securities. The securities may or may not be listed on a national securities
exchange or for quotation through the National Association of Securities Dealers
Automated Quotation System.
Underwriters, agents and dealers may engage in transactions with or perform
services, including various investment banking and other services, for us and/or
any of our affiliates in the ordinary course of business.
LEGAL MATTERS
Michael M. Sullivan, Esq., our Secretary and Corporate Counsel, will issue
an opinion for us with respect to the validity of the securities offered hereby.
Any underwriters, dealers or agents will be advised about issues relating to
this offering by their own legal counsel.
EXPERTS
The consolidated audited financial statements incorporated in this
prospectus by reference to our Annual Report on Form 10-K for the year ended
June 30, 1999, have been so incorporated in reliance on the report of Ernst &
Young LLP, independent accountants, given on the authority of that firm as
experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Those reports, proxy statements and other information
may be obtained:
- At the Public Reference Room of the SEC, Room 1024-Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549;
- At the public reference facilities at the SEC's regional offices located
at Seven World Trade Center, 13th Floor, New York, New York 10048 or
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661;
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- From the SEC, Public Reference Section, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549;
- At the offices of The New York Stock Exchange, 20 Broad Street, New York,
New York 10005; and
- From the Internet site maintained by the SEC at http://www.sec.gov, which
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC.
Some locations may charge prescribed or modest fees for copies.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until we sell all of the securities, or after the date of this initial
registration statement and before the effectiveness of the registration
statement.
- Annual Report on Form 10-K for the year ended June 30, 1999 (including
information specifically incorporated by reference into our Form 10-K
from our definitive Proxy Statement for our 1999 Annual Meeting of
Stockholders).
- Quarterly Report on Form 10-Q for the quarter ended September 26, 1999.
- The description of SCI's common stock contained in SCI's registration
statement on Form 8-A filed with the SEC on March 18, 1997.
On request we will provide at no cost to each person, including any
beneficial owner, who receives a copy of this prospectus, a copy of any or all
of the documents incorporated in this prospectus by reference. We will not
provide exhibits to any of such documents, however, unless such exhibits are
specifically incorporated by reference into those documents. Written or
telephone requests for such copies should be addressed to our Treasurer, Ronald
G. Sibold, c/o SCI Systems (Alabama) Inc., P. O. Box 1000, Huntsville, Alabama
35807, telephone number (256) 882-4131.
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$400,000,000
SCI SYSTEMS, INC.
% Convertible Subordinated Notes due 2007
(SCI LOGO)
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PROSPECTUS SUPPLEMENT
MARCH 3, 2000
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SALOMON SMITH BARNEY BANC OF AMERICA SECURITIES LLC
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