-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CxIiKZwlkXRKaoiQXKBQQVaChs3Sll1RNuN1woSXitp7E2fVY+Z5TM2HUygJmrdB 62a8kL9TMU4X0RaSl/EzZQ== 0000087744-96-000029.txt : 19960930 0000087744-96-000029.hdr.sgml : 19960930 ACCESSION NUMBER: 0000087744-96-000029 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960927 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCI SYSTEMS INC CENTRAL INDEX KEY: 0000087744 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 630583436 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-02251 FILM NUMBER: 96636374 BUSINESS ADDRESS: STREET 1: 2101 W CLINTON AVE STREET 2: C/O SCI SYSTEMS (ALABAMA) INC CITY: HUNTSVILLE STATE: AL ZIP: 35805 BUSINESS PHONE: 3029980592 MAIL ADDRESS: STREET 1: P.O. BOX 1000 CITY: HUNTSVILLE STATE: AL ZIP: 35807 FORMER COMPANY: FORMER CONFORMED NAME: SPACE CRAFT INC DATE OF NAME CHANGE: 19720517 10-K 1 FORM 10-K FOR SCI SYSTEMS UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------------------- FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1996 Commission File No. 0-2251 ----------------------------------- SCI SYSTEMS, INC. (Exact name of registrant as specified in its charter) Delaware 63-0583436 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) c/o SCI Systems (Alabama), Inc. 2101 West Clinton Avenue Huntsville, Alabama 35805 (Address of principal executive offices) (Zip Code) ----------------------------------------- (302) 998-0592 (Registrant's telephone number, including area code) ----------------------------------------- Securities registered pursuant to Section 12 (b) of the Act: None ---------------------------------------- Securities registered pursuant to Section 12 (g) of the Act: Common Stock, $.10 Par Value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes .X. No .... Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. [....] At August 22, 1996, the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $1,266,816,000. At August 22, 1996, there were 29,608,112 outstanding shares of the registrant's Common Stock. Documents Incorporated By Reference Portions of the registrant's 1996 Annual Report to Shareholders are incorporated by reference into Parts I and II. Portions of the registrant's definitive Proxy Statement for its October 25, 1996, Annual Meeting of Shareholders are incorporated by reference into Part III. PART I AND II DOCUMENTS INCORPORATED BY REFERENCE The following information required by Parts I and II is incorporated herein by reference to the Company's 1996 Annual Report to Shareholders, included herein as Exhibit 13: Excerpts from Form 10-K (contained in the 1996 Annual Report to Annual Shareholders) Report Page (s) Pages PART I. ITEM 1. Business Inside Front 1 to 3 Cover and 4 to 14 ITEM 2. Properties 3 ITEM 3. Legal Proceedings 3 ITEM 4. Submission of Matters to a Vote of Security Holders 3 PART II. ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters 3 and 10 ITEM 6. Selected Financial Data 1 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 2 to 14 3 and 4 ITEM 8. Consolidated Financial Statements and Supplementary Data 5 to 12 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not Applicable PART III DOCUMENT INCORPORATED BY REFERENCE The following information required by Part III is incorporated herein by reference to the Company's definitive Proxy Statement pursuant to Regulation 14A for the October 25, 1996 Annual Meeting of Shareholders, filed with The Securities and Exchange Commission within 120 days after close of the fiscal year: Proxy Statement Page (s) ITEM 10. Directors and Executive Officers of the Registrant 2, 3 and 5 ITEM 11. Executive Compensation 5 to 7 ITEM 12. Security Ownership of Certain Beneficial Owners and Management 1 and 2 ITEM 13. Certain Relationships and Related Transactions None PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Index to exhibits, financial statements and schedules 1. Financial Statements The following consolidated financial statements of the registrant are included in Item 8: Excerpts from Form 10-K (contained in the 1996 Annual Report to Shareholders) Page (s) ------------------ Consolidated Balance Sheets as of June 30, 1996, 1995, and 1994 5 For the years ended June 30, 1996, 1995 and 1994: Consolidated Statements of Income 6 Consolidated Statements of Shareholders' Equity 6 Consolidated Statements of Cash Flows 7 Notes to Consolidated Financial Statements 8 to 12 Report of Ernst & Young LLP, Independent Auditors 12 2. Schedules The following consolidated financial statement schedule of the registrant is included hereafter: Schedule II - Valuation and qualifying accounts All other schedules are omitted as inapplicable or because the required information is included in the consolidated financial statements or notes thereto. 3. Exhibits Number DESCRIPTION 2 Purchase Agreement between the Company and Apple Computer, Inc. concerning purchase of Fountain, Colorado plant and certain other assets. (Incorporated by reference to Exhibit 2 to Form 8-K filed on June 14, 1996.) 3.1 Second Restated Certificate of Incorporation, as amended, and Certificate of Amendment of the Second Restated Certificate of Incorporation as filed with the Secretary of State of Delaware on January 26, 1996. (Incorporated herein by reference to Exhibit 4.1 to Registration Statement on Form S-3, File No. 333-05917, as amended.) 3.2 By-laws of the Registrant, as amended. (Incorporated herein by reference to Exhibit 4.2 to Registration Statement on Form S-3, File No. 333-05917, as amended.) 4.1 Indenture dated as of April 23, 1996 between the Company and PNC Bank, Kentucky, Inc., as trustee, relating to the Company's 5% Convertible Subordinated Notes due 2006. (Incorporated herein by reference to Exhibit 4.3 to Registration Statement on Form S-3, File No. 333-05917, as amended.) 4.2 Registration Agreement dated April 23, 1996 by and among the Company, Salomon Brothers Inc, Merrill Lynch & Co., and Montgomery Securities, as initial purchasers of the Company's 5% Convertible Subordinated Notes due 2006. (Incorporated herein by reference to Exhibit 4.4 to Registration Statement on Form S-3, File No.333-05917, as amended.) 10(a)(1) Credit Agreement dated June 25, 1993, by and between the Registrant, its Obligated Subsidiaries and its Lenders. (Incorporated herein by reference to exhibit of the same number to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1993.) (2) Amended and Restated Credit Agreement dated as of August 3, 1995, by and between the Registrant, its Obligated Subsidiaries and its Lenders. (Incorporated herein by reference to exhibit of the same number to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1995.) (3) First Modification of Amended and Restated Credit Agreement (dated as of August 3, 1995) made as of December 8, 1995 between the Registrant, its Obligated Subsidiaries and its Lenders.(Incorporated by reference to Exhibit 10 to Form 10-Q for the quarter ended December 24, 1995.) (4) Second Modification of Amended and Restated Credit Agreement (dated as of August 3, 1995) made as of March 26, 1996 between the Registrant, its Obligated Subsidiaries and its Lenders. (5) Third Modification of Amended and Restated Credit Agreement (dated as of August 3, 1995) made as of June 28, 1996 between the Registrant, its Obligated Subsidiaries and its Lenders. (b)(1) Receivable Purchase Agreement dated as of June 30, 1995, among SCI Technology, Inc., as Seller, SCI Systems, Inc., as Guarantor, and Receivables Capital Corporation, as Purchaser, and Bank of America National Trust and Savings Association, as Administrative Agent.(Incorporated herein by reference to exhibit of the same number to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1995.) (2) First Amendment to Receivable Purchase Agreement dated as of July 14,1995 (3) Second Amendment to Receivable Purchase Agreement dated as of August 30,1995 (4) Third Amendment to Receivable Purchase Agreement dated as of December 15,1995 (5) Fourth Amendment to Receivable Purchase Agreement dated as of April 1, 1966 (c)(1) Directors and Officers Liability Insurance Policies 3. Exhibits Number DESCRIPTION (d)(1) SCI Systems, Inc. 1994 Stock Option Incentive Plan. (Management contracts or compensatory plan) (Incorporated herein by reference to exhibit of the same number to the Registrant's Annual Report on Form 10-K for the year ended June 30, 1995.) (e)(1) Savings Plan of the SCI Systems, Inc. Employee Financial Security Program, dated July 1, 1991.(Management contracts or compensatory plan)(Incorporated herein by reference to Exhibit 10 (i)(1) to the Registrant's Report on Form 10-K for the fiscal year ended June 30, 1994.) (f)(1) Deferred Compensation Plan of SCI Systems Employee Financial Security Program, as amended and restated January 1, 1992.(Management contracts or compensatory plan) (Incorporated herein by reference to Exhibit 10(j)(1) to the Registrant's Report on Form 10-K for the fiscal year ended June 30, 1994.) (g)(1) Supplemental Retirement Plan of the SCI Systems, Inc. Employee Financial Security Program, as amended and restated April 1994. (Management contracts or compensatory plan) (Incorporated herein by reference to Exhibit 10 (k)(1) to the Registrant's Report on Form 10-K for the fiscal year ended June 30, 1994.) (h)(1) Adjustable Rate Senior Notes due 2006 Purchase Agreement, made as of June 28, 1996. 11 Computation of primary and fully diluted earnings per share for the years ended June 30, 1996, 1995 and 1994. 13 1996 Annual Report to Shareholders. Except for the parts of the SCI Systems, Inc. Annual Report expressly incorporated into this Form 10-K by reference, the Annual Report is not to be deemed filed with the Securities and Exchange Commission. 21 Subsidiaries of Registrant. 23 Consent of Independent Auditors. 27 Financial Data Schedule (b) Two reports on Form 8-K were filed by the Registrant for the period March 25, 1996 through June 30, 1996. The report on Form 8-K dated April 15,1996 dealt with the issuance of convertible subordinated notes. The other report on Form 8-K, dated June 14, 1996, dealt with the purchase of Apple Computers, Inc.'s Fountain, Colorado plant and certain equipment and inventory. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (In thousands of dollars)
Balance Additions Additions Deductions Balance End of Beginning Charged to Costs Charged to Other (1) Year Description of Year and Expenses Accounts Year ended June 30, 1996: Allowance for doubtful accounts $4,267 $1,843 $ -0- $ 110 $6,000 Year ended June 30, 1995: Allowance for doubtful accounts $4,267 $1,018 $ -0- $1,018 $4,267 Year ended June 30, 1994: Allowance for doubtful accounts $4,600 $4,192 $ -0- $4,525 $4,267 (1) Uncollectible accounts written off, net of recoveries
SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SCI SYSTEMS, INC. Date: September 24, 1996 By:/s/Olin B. King Olin B. King Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. DATE SIGNATURE TITLE September 24, 1996 /s/Olin B. King Chairman of the Board and Olin B. King Chief Executive Officer (Principal Executive Officer) (Principal Financial and Accounting Officer) September 24, 1996 /s/A. Eugene Sapp, Jr. Director, President, and A. Eugene Sapp, Jr. Chief Operating Officer (Principal Operating Officer) September 24, 1996 /s/Howard H. Callaway Director Howard H. Callaway September 24, 1996 /s/William E. Fruhan Director William E. Fruhan September 24, 1996 /s/Joseph C. Moquin Director Joseph C. Moquin September 24, 1996 /s/Wayne Shortridge Director Wayne Shortridge September 24, 1996 /s/G. Robert Tod Director G. Robert Tod September 24, 1996 /s/Jackie M. Ward Director Jackie M. Ward EX-10 2 AMENDED AND RESTATED CREDIT AGREEMENT [ EXHIBIT 10 (a) (4)] SECOND MODIFICATION OF AMENDED AND RESTATED CREDIT AGREEMENT THIS SECOND MODIFICATION OF AMENDED AND RESTATED CREDIT AGREEMENT (this "Modification") is made as of this 29th day of March, 1996, by and among SCI SYSTEMS, INC., a Delaware corporation (the "Borrower"), the banks and other financing institutions which are signatories to this Modification (the "Banks"), CITIBANK, N.A., acting in its capacity as agent for the Banks (the "Agent") and ABN-AMRO BANK N.V., acting through its Atlanta Agency and in its capacity as co-agent for the Banks (the "Co-Agent"). Statement of Facts Borrower, the Agent, the Co-Agent and the Banks are parties to that certain Amended and Restated Credit Agreement, dated as of August 3, 1995, as amended by First Modification of Amended and Restated Credit Agreement dated as of December 8, 1995 (as same may hereinafter be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), pursuant to which the Banks committed to loan certain amounts to the Borrower and the Co-Agent (acting for the Commercial Paper Banks, as defined in the Credit Agreement) has issued a Letter of Credit for the benefit of the Borrower. Borrower has requested that the Agent, the Co-Agent and the Banks consent to the purchase by the Borrower, or one of its Subsidiaries, of Apple Computer, Inc.'s manufacturing, assembly and distribution facility in Fountain, Colorado, including certain real property, plant, equipment and inventory pertaining thereto and the operations therein and any equipment to be located therein, and the Agent, the Co-Agent and the Banks are willing to grant such consent, subject to the terms and conditions hereinafter provided. Borrower has also requested that the Agent, the Co-Agent and the Banks consent to an increase of up to $90,000,000 in the Total Commitment comprised of an increase of up to $60,000,000 in the Total Revolving Commitment and an increase of up to $30,000,000 in the Total Commercial Paper Commitment and the Agent, the Co-Agent and the Banks are willing to grant such consent, subject to the terms and conditions of this Modification. Borrower has also requested that the Agent, the Co-Agent and the Banks agree to (I) a $50,000,000 increase in the Receivables Purchase Facility, (ii) a $25,000,000 increase in the Term Note Facility, and (iii) an increase in the amount of the Permitted Subordinated Debentures (as defined in the Credit Agreement) to an aggregate principal amount not to exceed $287,500,000, and the Agent, the Co-Agent and the Banks are willing to agree to such requests, subject to the terms and conditions of this Modification. NOW, THEREFORE, in consideration of the premises, the covenants and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower, the Agent, the Co-Agent and the Banks do hereby agree as follows: Statement of Terms 1. Definitions. All capitalized terms used in this Modification but not otherwise defined or limited herein shall have the meanings set forth in the Credit Agreement, as amended hereby. 2. Consent to Transactions. Subject to the fulfillment of the conditions precedent to the effectiveness of this Modification which are set forth below, the Agent, Co-Agent and Banks hereby consent to the consummation of the Fountain Acquisition all on the terms and conditions set forth in this Modification, and agree that the Fountain Acquisition does not constitute a Permitted Transaction for purposes of the calculation of the Permitted Transaction Amount. In addition, subject to the fulfillment of the conditions precedent to the effectiveness of this Modification which are set forth below, and pursuant to Section 15.09 of the Credit Agreement, the Agent, the Co-Agent and the Banks hereby consent to the increase in the Total Commitment, the Total Commercial Paper Commitment and the Total Revolving Credit Commitment all on the terms and conditions set forth in this Modification. 3. Amendment to Credit Agreement. Subject to the fulfillment of the conditions precedent to the effectiveness of this Modification which are set below, the parties hereby agree as follows: (a) The Credit Agreement is modified by adding to Section 1.01 thereof the following new definitions: "Fountain Acquisition: the purchase by the Borrower or one of its Subsidiaries of Apple Computer, Inc.'s manufacturing, assembly and distribution facility in Fountain, Colorado, including certain real property, plant, equipment and inventory pertaining thereto and the operations therein and any equipment to be located therein, pursuant to acquisition documents which comply, at a minimum, to the Fountain Acquisition Required Standards. Fountain Acquisition Loan: an acquisition loan (a) in an aggregate amount not to exceed $200,000,000 minus the aggregate amount of the Permitted Subordinated Debentures which have been issued pursuant to the terms of this Agreement, and (b) incurred by the Borrower in connection with the Fountain Acquisition so long as on the date that such loan is incurred, and after giving effect thereto, (I) all representations and warranties of the Borrower and the other Credit Parties in the Credit Agreement are true, correct and complete in all material respects and no Default or Event of Default has occurred and is continuing (including, without limitation, any Default or Event of Default under any of the financial covenants specified in Section 9.12(b)-(f) of the Credit Agreement), (ii) the credit documents evidencing such loan are in form and substance reasonably satisfactory to the Agent and the Co-Agent in all respects, (iii) the proceeds of such loan are used to consummate the Fountain Acquisition, and (iv) the Borrower has delivered to Agent a certificate with respect to the foregoing signed by its Chairman or President. Fountain Acquisition Required Standards: with respect to the Fountain Acquisition, (I) a purchase price not in excess of $275,000,000 (whether in cash, stock, property other than stock, or assumption of indebtedness including trade liabilities, or a combination of any of the foregoing), (ii) consummation of the Fountain Acquisition by August 1, 1996, (iii) an agreement by Apple Computer, Inc. to purchase inventory pursuant to the terms of the Fountain Supply Contract, and (iv) the execution of acquisition documents whose terms (including any assumption of liabilities by any Credit Party and any indemnification provided by any Credit Party) are (x) consistent with terms to which a Person exercising reasonable business judgment would agree and (y) reasonably consistent with the past business practices of the Borrower and its Subsidiaries. Fountain Supply Contract : the supply contract or contracts between the Borrower or one of its Subsidiaries and Apple Computer, Inc., executed in connection with the Fountain Acquisition, which are for terms in excess of one year and whose terms are (x) consistent with terms to which a Person exercising reasonable business judgment would agree and (y) reasonably consistent with the past business practices of the Borrower and its Subsidiaries, as such contracts may be amended from time to time." (b) The Credit Agreement is further modified by amending the definitions of "Intercreditor Agreement," "Receivables Purchase Transaction," "Term Note Facility," "Total Commercial Paper Commitment," "Total Commitment" and "Total Revolving Credit Commitment," in their entirety to read as follows: "Intercreditor Agreement: The Intercreditor Agreement dated as of December 2, 1994, among the Agent, the Co-Agent, the Banks, C and I (Division) Holdings and the Bank of Ireland and consented to and acknowledged by the Borrower and the Subsidiaries as such Intercreditor Agreement may be amended or supplemented from time to time, together with any other intercreditor agreement which may be entered into among the Agent, the Co-Agent, the Banks, C and I (Division) Holdings, the Bank of Ireland and the holders of the Term Note Facility, and consented to and acknowledged by the Borrower and the Subsidiaries providing for the pro rata sharing of the proceeds of any collateral pledged by the Borrower or any Subsidiary realized upon by any party to such intercreditor agreement, as such intercreditor agreement may be amended or supplemented from time to time. Receivables Purchase Transaction: a revolving trade receivable securitization facility not to exceed $200,000,000 (or $250,000,000 in the event that the Foreign Receivables Transaction is combined with the Receivables Purchase Transaction) whereby a Person purchases from time to time and on a Non-Recourse basis, accounts receivable or undivided fractional interests in one or more pools of accounts receivable of a Credit Party or Credit Parties or a Bankruptcy Remote Subsidiary. Term Note Facility: an unsecured term note facility or any refinancings thereof, in each case to be entered into by Borrower not to exceed $100,000,000, to be privately placed with institutional investors and which provides that such facility is subject to the Intercreditor Agreement and will mature after December 8, 2000. Total Commercial Paper Commitment: At any time, the sum of the Commercial Paper Commitments, which amount is subject to reduction pursuant to Section 3.01. Total Commitment: At any time, the sum of the Commitments of each of the Banks at such time, which amount is subject to reduction pursuant to Section 3.01. Total Revolving Credit Commitment: At any time, the sum of the Revolving Credit Commitments, which amount is subject to reduction pursuant to Section 3.01." (c) The Credit Agreement is hereby further modified by deleting Section 3.01(a) in its entirety and substituting in lieu thereof the following new Section 3.01(a): "(a) The initial Total Commitment will be no greater than $410,000,000. The initial Total Revolving Credit Commitment will be no greater than $260,000,000. The initial Total Commercial Paper Commitment will be no greater than $150,000,000." (d) The Credit Agreement is hereby further modified by adding to the end of Section 9.07 thereof the following new paragraph: "In addition, within ten (10) Business Days after the Borrower or any of its Subsidiaries has knowledge of (x) any material write-offs in connection with the Fountain Supply Contract or (y) any change in, or any default or event of default under, or any event, which with the giving of notice or the passage of time or both, would be a default or event of default under, the Fountain Supply Contract, which change, default, event of default or event could have a material adverse effect on the business, prospects, properties, assets, liabilities, financial condition or operations of the Borrower and its Subsidiaries taken as a whole, the Borrower will furnish to the Agent and the Co-Agent an Officer's Certificate setting forth the details thereof and the action which the applicable Credit Party proposes to take with respect thereto." (e) The Credit Agreement is further modified by adding to Section 10.02 the following new Section 10.02(xiii), with the intent being that the Indebtedness described in Section 10.02(xiii) is permitted: "(xiii) The Fountain Acquisition Loan." (f) The Credit Agreement is further modified by adding to Section 10.03A the following new Section 10.03A(iv), with the intent being that the acquisition described in Section 10.03A(iv) is permitted subject to the terms set forth in Section 10.03(A)(iv): "(iv) Consummate the Fountain Acquisition so long as on the date that the Fountain Acquisition is consummated, and after giving effect thereto, (I) all representations and warranties of the Borrower and the other Credit Parties in the Credit Agreement are true, correct and complete in all material respects and no Default or Event of Default has occurred and is continuing (including, without limitation, any Default or Event of Default under any of the financial covenants specified in Section 9.12(b)-(f) of the Credit Agreement) and (ii) the Borrower has delivered to Agent a certificate with respect to the foregoing signed by its Chairman or President." (g) The Credit Agreement is hereby further modified by deleting Sections 10.14(a), (c) and the last paragraph of Section 10.14 in their entirety and substituting in lieu thereof the following new Sections 10.14(a), (c) and last paragraph thereto: "(a) Issue any Permitted Subordinated Debentures or any other Subordinated Debt without the express prior written consent of the Agent, the Co-Agent and the Required Banks; provided, however, that Borrower may issue Permitted Subordinated Debentures from time to time which in the aggregate do not exceed $287,500,000 so long as (A) such Permitted Subordinated Debentures are subordinated in writing to all Obligations of the Borrower and each Subsidiary, such subordination provisions to be on terms and conditions satisfactory in all respects to the Agent and the Co-Agent, (B) the maturity date of such Permitted Subordinated Debentures occurs after the then current Credit Expiration Date, and (C) the proceeds from the issuance of the Permitted Subordinated Debentures are used first to pay in full the Fountain Acquisition Loan. (c) Redeem, repurchase, defease, consummate an exchange for or otherwise acquire for consideration any Subordinated Debt, or give irrevocable written notice to take any such action, except as required by the indenture, debentures or other instruments evidencing such Subordinated Debt or to the extent issued, any Permitted Subordinated Debentures. Notwithstanding the foregoing, Borrower may repurchase up to the lesser of (A) fifty percent (50%) of the aggregate amount of the Permitted Subordinated Debentures or (B) $84,000,000 of the Permitted Subordinated Debentures provided that (I) immediately prior to such repurchase and after giving effect to such repurchase, the ratio of Borrower's Total Debt to Total Capital (calculated in percentage terms) shall not be more than sixty-five percent (65%), (ii) prior to and after giving effect to such repurchase, no Default or Event of Default exists or would be created by such repurchase, (iii) the repurchase price of the Permitted Subordinated Debentures has been discounted by at least twenty percent (20%) to par and (iv) no direct proceeds of the Loans are used to repurchase such Permitted Subordinated Debentures." (h) The Credit Agreement is hereby further modified by deleting Section 10.15(a) in its entirety and substituting in lieu thereof the following new Section 10.15(a): "(a) Agree to any amendment to or a modification of the terms or conditions of any Asset Securitization Document executed in connection with a Permitted Asset Securitization Transaction that would in any way cause such transaction to not be on a Non-Recourse basis or cause the total facility amount of such transaction to exceed (a) if done as separate transactions, $50,000,000 (in the case of the Foreign Receivables Transaction) or $200,000,000 (in the case of the Receivables Purchase Transaction) and (b) $250,000,000 in the event the Foreign Receivables Transaction is combined into the Receivables Purchase Transaction as a single securitization facility." (I) The Credit Agreement is further modified by deleting the amount "$75,000,000" appearing in Section 10.15(c)(I) and replacing it with the amount "$100,000,000". (j) The Credit Agreement is further modified by adding to Article X thereof the following new Section 10.16: "10.16. Term Note Facility. Make or agree to make any voluntary or mandatory principal payment or prepayment on the note or notes evidencing the Indebtedness owing by Borrower under the Term Note Facility on or before December 8, 2000 without the prior written consent of the Agent, Co-Agent and the Required Banks." 4. No Other Amendments. Except for the amendments expressly set forth and referred to in Section 3 above, the Credit Agreement remains unchanged and in full force and effect; provided, however that the Banks, the Agent and the Co-Agent hereby authorize the Agent to enter into or obtain from the Credit Parties such modifications to the Credit Documents as the Agent may deem to be necessary or appropriate in order to reflect the amendments set forth herein. Nothing in this Modification is intended, or shall be construed, to constitute a novation or an accord and satisfaction of any of the Borrower's indebtedness or any indebtedness of any other Credit Party to the Banks, the Agent or the Co-Agent under or in connection with the Credit Agreement (collectively, the "Obligations") or to modify, affect or impair the perfection or continuity of the security interests in, security titles to or other liens on any collateral for the Obligations. 5. Representations and Warranties. To induce the Agent, the Co-Agent and the Banks to enter into this Modification, the Borrower does hereby warrant, represent and covenant to such parties that: (a) each representation or warranty of the Borrower set forth in the Credit Agreement is hereby restated and reaffirmed as true and correct on and as of the date hereof as if such representation or warranty were made on and as of the date hereof (except to the extent that any such representation or warranty expressly relates to a prior specific date or period and except as otherwise disclosed on Schedule 1 attached hereto), and no Default or Event of Default has occurred and is continuing as of this date under the Credit Agreement as amended by this Modification; and (b) Borrower has the power and is duly authorized to execute, deliver and perform its obligations under this Modification and this Modification is the legal, valid and binding obligation of Borrower enforceable against it in accordance with its terms. 6. Conditions Precedent to Effectiveness of this Modification. The effectiveness of this Modification and the consents and amendments provided in Section 2 and Section 3 above are subject to the fulfillment of the following additional conditions precedent: (a) the Agent shall have received one or more counterparts of this Modification duly executed and delivered by the Borrower, the Agent, the Co-Agent and the Banks; (b) any and all Guarantors of the Obligations shall have consented to the execution, delivery and performance of this Modification and all of the transactions contemplated hereby by signing one or more counterparts of a Confirmation of Guaranty in the form of Attachment 1 attached hereto and returning the same to the Agent; (c) the Agent shall have received one or more counterparts of an Officer's Certificate in form and substance acceptable to the Agent executed by the Borrower and each Guarantor; (d) the Agent shall have received an opinion of Borrower's and Guarantors' counsel in form and substance reasonably satisfactory to the Agent and an opinion of in-house counsel to the Borrower and the Guarantors in form and substance reasonably satisfactory to the Agent; (e) Each and every representation and warranty of the Borrower set forth in Section 5 above shall be true and correct in all material respects as of the date of and after giving effect to this Modification; and (f) There shall not exist as of the date of and after giving effect to this Modification any Default or Event of Default under the Credit Agreement as amended by this Modification. Notwithstanding the foregoing, the increase of the Total Commitment, the Total Commercial Paper Commitment and the Total Revolving Credit Commitment are subject to the fulfillment of the following additional conditions precedent: (1) the Agent and the Co-Agent shall have received written commitments from each of the Banks electing to increase its Commitment, and, if applicable, written commitments from any new Bank which meets the requirements of an Eligible Assignee, within the meaning specified in Section 15.04(b)(v) of the Credit Agreement with respect to such new Bank's commitment; (2) With respect to any new Bank, the Agent shall have received an agreement from such new Bank in form and substance satisfactory to the Agent and the Borrower with respect to its status as a "Bank" under the Credit Agreement; (3) each Revolving Credit Bank shall have received a replacement Series A Master Note duly executed and delivered by the Borrower; (4) each Commercial Paper Bank shall have received a replacement Series B Master Note and a replacement Series C Master Note duly executed and delivered by the Borrower; (5) the Agent shall have received a replacement Subsidiary Note in an original principal amount equal to the new Total Commitment duly executed and delivered by each Subsidiary; (6) the Agent shall have received a consent and reaffirmation from each Credit Party in form and substance satisfactory to the Agent; (7) the Agent shall have received one or more counterparts of an Officer's Certificate in form and substance acceptable to the Agent executed by the Borrower and each Guarantor; (8) the Agent shall have received opinions of (I) Borrower's and the Credit Parties' counsel in form and substance reasonably satisfactory to the Agent, (ii) in-house counsel to the Borrower and the Credit Parties in form and substance reasonably satisfactory to the Agent, (iii) foreign counsel to the Foreign Subsidiaries in form and substance reasonably satisfactory to the Agent, and (iv) an update of the August 3, 1995 opinions of Maynard, Cooper & Gale, P.C. in form and substance reasonably satisfactory to the Agent; (9) the Agent shall have received a fully executed counterpart of an amendment to the Letter of Credit increasing the face amount thereunder to the revised Total Commercial Paper Commitment; (10) the Agent shall have received a fully executed counterpart of an amendment to the Depository Agreement; (11) the Agent shall have received written confirmation from Moody's Investor Services, Inc. and Standard & Poor's Ratings Service of their ratings of at least "P-1" and "A-1 plus", respectively, after giving effect to the increase of the Total Commitment, the Total Commercial Paper Commitment and the Total Revolving Credit Commitment as contemplated by this Modification; (12) the Agent shall have received certificates of good standing for each of the Credit Parties in the jurisdictions set forth on Schedule 8.01 and, with respect to the Credit Party which is a party to the Fountain Acquisition, a certificate of good standing from such Credit Party from the jurisdiction of its incorporation and the Colorado Secretary of State; (13) the Agent shall have received (i) updates to the lien search results conducted in connection with the August 3, 1995 closing of the Credit Agreement with a search date within fifteen days of the effective date of the increase in the commitments, which updates will be in form and substance reasonably satisfactory to the Agent and (ii) lien searches under the names of Apple Computer, Inc., any subsidiary of Apple Computer, Inc. involved in the Fountain Acquisition and the Credit Party which is a party to the Fountain Acquisition from the Colorado Secretary of State and the Office of the County Clerk and Recorder of El Paso County, Colorado in form and substance satisfactory to the Agent; (14) Each and every representation and warranty of the Borrower set forth in Section 5 above shall be true and correct in all material respects as of the date of and after giving effect to the increases in the Total Commitment, the Total Commercial Paper Commitment and the Total Revolving Credit Commitment as contemplated by the Modification; and (15) There shall not exist as of the date of, and after giving effect to, the increase in the Total Commitment, the Total Commercial Paper Commitment and the Total Revolving Credit Commitment any Default or Event of Default under the Credit Agreement as amended by this Modification. 7. Evidence of Effectiveness of Increase in Total Commitment, Total Commercial Paper Commitment and Total Revolving Credit Commitment. (a) Upon the effectiveness of the increase in the Total Commitment, Total Commercial Paper Commitment and Total Revolving Credit Commitment, the Agent will deliver to the Co-Agent, the Banks and the Borrower a revised Annex I, which annex will detail the revised Total Commitment, the revised Total Commercial Paper Commitment and the revised Revolving Credit Commitment. The Agent shall also deliver to the Co-Agent, the Banks and the Borrower, a revised Exhibit D-1(a) (Notice of Borrowing - Base Rate Advance), a revised Exhibit D-1(b) (Notice of Borrowing - Eurodollar Rate Advance), and a revised Exhibit E-2 (Form of Subsidiary Note), each of which shall reflect the increase in the Total Commitment, Total Commercial Paper Commitment and the Total Revolving Credit Commitment, as the case may be. Upon such delivery, the revised Annex I, Exhibit D-1(a), Exhibit D-1(b) and Exhibit E-2 will supersede and replace the current counterpart of such annex or exhibit, and will automatically be deemed to be incorporated into the Credit Agreement without further action of any party to the Credit Agreement. (b) Upon the effectiveness of any increase in the Total Commercial Paper Commitment, the Co-Agent will cause an amendment to the Letter of Credit to be issued to reflect such increase and the Co-Agent will deliver a copy of such amendment to the Agent, the Banks and the Borrower. 8. Counterparts. This Modification may be executed in multiple counterparts, each of which shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. 9. Delivery of Material Asset Securitization Documents and Material Fountain Acquisition Agreements. (a) Borrower shall deliver, or cause to be delivered, to the Agent and the Co-Agent, a copy of the material Asset Securitization Documents executed in connection with a Permitted Asset Securitization Transaction promptly after the consummation of such Permitted Asset Securitization Transaction. (b) Borrower shall also use its best use reasonable efforts to deliver, or cause to be delivered, to the Agent and the Co-Agent, a copy of the material agreements in substantially final form (including all available exhibits and schedules thereto) to be executed in connection with the Fountain Acquisition, including without limitation, the Fountain Supply Contract, within a reasonably sufficient time prior to the signing of so that the Agent and the Co-Agent may review such documents.such material agreements. (c) Borrower shall also deliver, or cause to be delivered, to the Agent and the Co-Agent, a copy of the material agreements (including all exhibits and schedules thereto) executed in connection with the Fountain Acquisition, including without limitation, the Fountain Supply Contract, promptly after the execution thereof. (d) Nothing contained in this Section 9 will give the Agent and the Co-Agent any right to request changes to the agreements to be executed in connection with the Fountain Acquisition unless the terms of such documents do not meet the Fountain Acquisition Required Standards. (e) Failure to comply with this paragraph 9 shall be deemed to be an Event of Default under the Credit Agreement, if such failure is not cured within thirty (30) days after receipt by the Borrower of written notice of such default from the Agent or the Co-Agent. 10. GOVERNING LAW. THIS MODIFICATION SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE. (Remainder of page intentionally left blank) IN WITNESS WHEREOF, the parties hereto have caused this Modification to be duly executed and delivered as of the day and year specified at the beginning hereof. BORROWER: SCI SYSTEMS, INC. (CORPORATE SEAL) By: Title: AGENT: CITIBANK, N.A. By: Name: Title: CO-AGENT: ABN-AMRO BANK N.V., ATLANTA AGENCY By: Name: Title: By: Name: Title: (Signatures continued on next page) (Signatures continued from preceding page) BANKS: ABN-AMRO BANK N.V., ATLANTA AGENCY By: Name: Title: By: Name: Title: CIBC, INC. By: Name: Title: CITIBANK, N.A. By: Name: Title: BANK OF AMERICA ILLINOIS By: Name: Title: (Signatures continued on next page) (Signatures continued from preceding page) FIRST ALABAMA BANK, N.A. By: Name: Title: MELLON BANK, N.A. By: Name: Title: NBD BANK By: Name: Title: THE BANK OF TOKYO, LTD. ATLANTA AGENCY By: Name: Title: (Signatures continued on next page) (Signatures continued from preceding page) THE DEVELOPMENT BANK OF SINGAPORE, LTD. By: Name: Title: THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED By: Name: Title: [END OF EXHIBIT 10(a)(4)] [EXHIBIT 10(a)(5)] THIRD MODIFICATION OF AMENDED AND RESTATED CREDIT AGREEMENT THIS THIRD MODIFICATION OF AMENDED AND RESTATED CREDIT AGREEMENT (this "Modification") is made as of this 28th day of June, 1996, by and among SCI SYSTEMS, INC., a Delaware corporation (the "Borrower"), the banks and other financing institutions listed on Annex I attached to the Credit Agreement as modified by this Modification (the "Banks"), CITIBANK, N.A., acting in its capacity as agent for the Banks (the "Agent") and ABN-AMRO BANK N.V., acting through its Atlanta Agency and in its capacity as co-agent for the Banks (the "Co-Agent"). Statement of Facts Borrower, the Agent, the Co-Agent and the Banks are parties to that certain Amended and Restated Credit Agreement, dated as of August 3, 1995, as amended by the First Modification of Amended and Restated Credit Agreement dated as of December 8, 1995 and the Second Modification of Amended and Restated Credit Agreement dated as of March 29, 1996 (the "Second Modification") (as same may hereinafter be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), pursuant to which the Banks committed to loan certain amounts to the Borrower and the Co-Agent (acting for the Commercial Paper Banks, as defined in the Credit Agreement) has issued a Letter of Credit for the benefit of the Borrower. Borrower, the Agent, the Co-Agent and the Banks are also parties to that certain Master Assignment and Acceptance Agreement dated as of the date hereof (the "Master Assignment") pursuant to which all the Banks (other than Commerzbank Aktiengesellschaft, Atlanta Agency, and PNC Bank, Kentucky, Inc. (collectively, the "New Banks")) assigned certain Commitments and Loans to the New Banks and certain other Banks. Pursuant to the terms of the Second Modification, the Agent, the Co-Agent and the Banks consented to an increase of up to $90,000,000 in the Total Commitment comprised of an increase of up to $60,000,000 in the Total Revolving Commitment and an increase of up to $30,000,000 in the Total Commercial Paper Commitment (collectively, the "Commitment Increase") subject to the satisfaction of the terms and conditions set forth in the Second Modification. The parties are entering into this Modification in order to effectuate the Commitment Increase, all in accordance with and subject to the terms and conditions hereinafter set forth in this Modification. Borrower also desires to enter into a $100,000,000 receivables purchase and secured loan facility. Borrower has requested that the Agent, the Co-Agent and the Banks consent to Borrower and any other Credit Party entering into a $100,000,000 receivables purchase and secured loan facility, and the Agent, the Co-Agent and the Banks are willing to give their consent, subject to the terms and conditions of this Modification. NOW, THEREFORE, in consideration of the premises, the covenants and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties do hereby agree as follows: Statement of Terms 1. Definitions. All capitalized terms used in this Modification but not otherwise defined or limited herein shall have the meanings set forth in the Credit Agreement, as amended hereby. 2. Consent to Transaction. Subject to the fulfillment of the conditions precedent to the effectiveness of this Modification which are set forth below, the Banks hereby consent to the consummation of the Loan/Purchase Transaction. 3. Amendment to Credit Agreement. Subject to the fulfillment of the conditions precedent to the effectiveness of this Modification which are set forth below, the parties hereby agree as follows: (a) The Credit Agreement is hereby modified by adding to Section 1.01 thereof, the following new definitions: "Inventory Loan: Any loan made from time to time to Borrower or any other Credit Party by a receivables securitization company managed by Bank of Tokyo-Mitsubishi Trust Company in an aggregate amount not to exceed $30,000,000 secured by a Lien on (a) the interest of Borrower or another Credit Party in the Toshiba Agreement, and (b) a Credit Party's Inventory which has been ordered pursuant to the Toshiba Agreement and pursuant to which the obligations of Borrower or such other Credit Party to repay the principal of such loans will become Non-Recourse to Borrower and the other applicable Credit Parties if such Inventory has resulted in Borrower's or any such Credit Party's issuance of an invoice to Toshiba. Loan/Purchase Transaction: The three-tranche facility, not to exceed $100,000,000 in the aggregate, provided to Borrower or any other Credit Party by a receivables securitization company managed by Bank of Tokyo-Mitsubishi Trust Company, consisting of (I) a revolving facility of up to $100,000,000 for the purchase on a Non-Recourse basis of trade receivables arising from the sale of computer equipment to Toshiba pursuant to the Toshiba Agreement, (ii) the Inventory Loan, and (iii) a facility of up to $60,000,000 whereby a receivables securitization company managed by Bank of Tokyo-Mitsubishi Trust Company purchases on a Non-Recourse basis the obligations of Toshiba with respect to Inventory which has been ordered pursuant to the Toshiba Agreement and which is evidenced by an invoice but which has not resulted in a sales or purchase order. Toshiba: Toshiba America Information Services, Inc. or any of its affiliates, and such party's successors and assigns. Toshiba Agreement: That certain Agreement to be entered into between Toshiba and Borrower or any other Credit Party with respect to the sale of computer equipment to Toshiba, as the same may be amended, supplemented or restated from time to time." (b) The Credit Agreement is further modified by amending the definitions of "Non-Recourse" and "Permitted Asset Securitization Transactions" in their entirety to read as follows: "Non-Recourse: means (I) that the terms and conditions applicable to the Receivables Purchase Transaction, the Foreign Receivables Transaction and the Loan/Purchase Transaction (other than the Inventory Loan) provide that the recourse of a purchaser of accounts receivable or any interest therein or any invoice for losses resulting from an obligor's failure to pay due to credit problems is limited to such accounts receivable or interests therein or such invoice (as the case may be), together in each case with any related security, if any, and, (ii) that the terms and conditions applicable to the Inventory Loan provide that the recourse of the receivables securitization company managed by the Bank of Tokyo-Mitsubishi Trust Company to recover against the Borrower or any other Credit Party for losses resulting from Toshiba's failure to pay a related invoice due to credit problems of Toshiba is limited to the interest of the Borrower or such Credit Party in the collateral for the Inventory Loan; provided, however, that the terms and conditions applicable to the Receivables Purchase Transaction, the Foreign Receivables Transaction and the Loan/Purchase Transaction may also provide for additional bases of non-recourse. Permitted Asset Securitization Transactions: The Receivables Purchase Transaction, the Foreign Receivables Transaction and the Loan/Purchase Transaction." (c) The Credit Agreement is hereby further modified by deleting Section 10.01(ix) in its entirety and replacing it with the following: "(ix) Liens granted by Borrower or any Credit Party in connection with the Loan/Purchase Transaction on the rights of Borrower or such Credit Party under the Toshiba Agreement and Liens granted by any Credit Party in connection with the Loan/Purchase Transaction on such Credit Party's Inventory which shall have been ordered pursuant to the Toshiba Agreement and" (d) The Credit Agreement is hereby further modified by deleting from Section 10.02(xi) the phrase "the Foreign Receivables Transaction" and replacing it with the phrase "the Foreign Receivables Transaction, the Loan/Purchase Transaction". (e) The Credit Agreement is further modified by adding to Section 10.03 the following new Section 10.03(xii): "(xii) The borrowing of any Inventory Loan by Borrower or any other Credit Party." (f) The Credit Agreement is hereby further modified by deleting Section 10.15(a) in its entirety and substituting in lieu thereof the following new Section 10.15(a): "(a) Agree to any amendment to or a modification of the terms or conditions of any Asset Securitization Document executed in connection with a Permitted Asset Securitization Transaction that would in any way cause such transaction to not be on a Non-Recourse basis or cause the total facility amount of such transaction to exceed (a) if done as separate transactions, $50,000,000 (in the case of the Foreign Receivables Transaction), $100,000,000 (in the case of the Loan/Purchase Transaction) or $150,000,000 (in the case of the Receivables Purchase Transaction), and (b) $200,000,000 in the event the Foreign Receivables Transaction is combined into the Receivables Purchase Transaction as a single securitization facility." (g) The Credit Agreement is hereby further modified by deleting each of Annex I, Exhibit D-1(a), Exhibit D-1(b) and Exhibit E-2 attached thereto in their entireties and by substituting in lieu thereof the new Annex I, Exhibit D-1(a), Exhibit D-1(b) and Exhibit E-2 attached hereto and incorporated herein and therein by reference. 4. No Other Amendments. Except for the amendments expressly set forth and referred to in Section 3 above, the Credit Agreement remains unchanged and in full force and effect; provided, however that the Banks, the Agent and the Co-Agent hereby authorize the Agent to enter into or obtain from the Credit Parties such modifications to the Credit Documents as the Agent may deem to be necessary or appropriate in order to reflect the amendments set forth herein. Nothing in this Modification is intended, or shall be construed, to constitute a novation or an accord and satisfaction of any of the Borrower's indebtedness or any indebtedness of any other Credit Party to the Banks, the Agent or the Co-Agent under or in connection with the Credit Agreement (collectively, the "Obligations") or to modify, affect or impair the perfection or continuity of the security interests in, security titles to or other liens on any collateral for the Obligations. 5. Representations and Warranties of Borrower. To induce the Agent, the Co-Agent and the Banks to enter into this Modification, the Borrower does hereby warrant, represent and covenant to such parties that: (a) each representation or warranty of the Borrower set forth in the Credit Agreement is hereby restated and reaffirmed as true and correct on and as of the date hereof as if such representation or warranty were made on and as of the date hereof (except to the extent that any such representation or warranty expressly relates to a prior specific date or period and except as otherwise disclosed on Schedule 1 attached hereto), and no Default or Event of Default has occurred and is continuing as of this date under the Credit Agreement as amended by this Modification; and (b) Borrower has the power and is duly authorized to execute, deliver and perform its obligations under this Modification and this Modification is the legal, valid and binding obligation of Borrower enforceable against it in accordance with its terms. 6. Conditions Precedent to Effectiveness of this Modification. The effectiveness of this Modification and the amendments provided in Section 3 above are subject to the fulfillment of the following additional conditions precedent: (a) the Agent shall have received one or more counterparts of this Modification and the Master Assignment duly executed by the Borrower, the Agent, the Co-Agent and the Banks; (b) each Revolving Credit Bank shall have received a replacement Series A Master Note duly executed and delivered by the Borrower in an original principal amount equal to the amount set forth as such Bank's Revolving Credit Commitment on Annex I attached hereto; (c) each Commercial Paper Bank shall have received a replacement Series B Master Note and a replacement Series C Master Note duly executed and delivered by the Borrower in an original principal amount equal to the amount set forth as such Bank's Commercial Paper Commitment on Annex I attached hereto ; (d) the Agent shall have received a replacement Subsidiary Note in an original principal amount equal to $410,000,000 duly executed and delivered by each Subsidiary; (e) the Agent shall have received a consent and reaffirmation from each Credit Party in form and substance satisfactory to the Agent; (f) the Agent shall have received one or more counterparts of an Officer's Certificate in form and substance acceptable to the Agent executed by the Borrower and each Guarantor; (g) the Agent shall have received opinions of (I) Borrower's and the Credit Parties' counsel in form and substance reasonably satisfactory to the Agent, (ii) in-house counsel to the Borrower and the Credit Parties in form and substance reasonably satisfactory to the Agent, (iii) foreign counsel to the Foreign Subsidiaries in form and substance reasonably satisfactory to the Agent, and (iv) an update of the August 3, 1995 opinions of Maynard, Cooper & Gale, P.C. in form and substance reasonably satisfactory to the Agent; (h) the Agent shall have received a fully executed counterpart of an amendment to the Letter of Credit increasing the face amount thereunder to the revised Total Commercial Paper Commitment; (i) the Agent shall have received a fully executed counterpart of an amendment to the Depository Agreement; (j) the Agent shall have received written confirmation from Moody's Investor Services, Inc. and Standard & Poor's Ratings Service of their ratings of at least "P-1" and "A-1 plus", respectively, after giving effect to the increase of the Total Commitment, the Total Commercial Paper Commitment and the Total Revolving Credit Commitment as contemplated by this Modification; (k) the Agent shall have received certificates of good standing for each of the Credit Parties in the jurisdictions set forth on Schedule 8.01 and, with respect to the Credit Party which is a party to the Fountain Acquisition, a certificate of good standing from such Credit Party from the jurisdiction of its incorporation and the Colorado Secretary of State; (l) the Agent shall have received (I) updates to the lien search results conducted in connection with the August 3, 1995 closing of the Credit Agreement with a search date within fifteen days of the effective date of the increase in the commitments, which updates will be in form and substance reasonably satisfactory to the Agent and (ii) lien searches under the names of Apple Computer, Inc., any subsidiary of Apple Computer, Inc. involved in the Fountain Acquisition and the Credit Party which is a party to the Fountain Acquisition from the Colorado Secretary of State and the Office of the County Clerk and Recorder of El Paso County, Colorado in form and substance satisfactory to the Agent; (m) Each and every representation and warranty of the Borrower set forth in Section 4 above shall be true and correct in all material respects as of the date of and after giving effect to the increases in the Total Commitment, the Total Commercial Paper Commitment and the Total Revolving Credit Commitment as contemplated by the Modification; and (n) There shall not exist as of the date of, and after giving effect to, the increase in the Total Commitment, the Total Commercial Paper Commitment and the Total Revolving Credit Commitment any Default or Event of Default under the Credit Agreement as amended by this Modification. 7. Counterparts. This Modification may be executed in multiple counterparts, each of which shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. 8. Delivery of Material Asset Securitization Documents. Borrower shall deliver, or cause to be delivered, to the Agent and the Co-Agent, a copy of the material Asset Securitization Documents executed in connection with the Loan/Purchase Transaction promptly after the consummation of the Loan/Purchase Transaction. Failure to comply with this paragraph 8 shall be deemed to be an Event of Default under the Credit Agreement if such failure is not cured within thirty (30) days after receipt by the Borrower of written notice of such default from the Agent or the Co-Agent. 9. GOVERNING LAW. THIS MODIFICATION SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE. (Remainder of page intentionally left blank) IN WITNESS WHEREOF, the parties hereto have caused this Modification to be duly executed and delivered as of the day and year specified at the beginning hereof. BORROWER: SCI SYSTEMS, INC. (CORPORATE SEAL) Attest: By: Cindy A. Brazell, Assistant Secretary Michael M. Sullivan, authorized signatory AGENT: CITIBANK, N.A. By: Name: Title: CO-AGENT: ABN-AMRO BANK N.V., ATLANTA AGENCY By: Name: Title: By: Name: Title: (Signatures continued on next page) (Signatures continued from preceding page) BANKS: ABN-AMRO BANK N.V., ATLANTA AGENCY By: Name: Title: By: Name: Title: BANK OF AMERICA ILLINOIS By: Name: Title: CIBC, INC. By: Name: Title: CITIBANK, N.A. By: Name: Title: (Signatures continued on next page) (Signatures continued from preceding page) COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA AGENCY By: Name: Title: By: Name: Title: FIRST ALABAMA BANK, N.A. By: Name: Title: MELLON BANK, N.A. By: Name: Title: NBD BANK By: Name: Title: PNC BANK, KENTUCKY, INC. By: Name: Title: (Signatures continued on next page) (Signatures continued from preceding page) THE BANK OF TOKYO-MITSUBISHI, LTD., ATLANTA AGENCY By: Name: Title: THE DEVELOPMENT BANK OF SINGAPORE, LTD. By: Name: Title: THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED By: Name: Title: SCHEDULE 1 TO THIRD MODIFICATION OF AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JUNE 28, 1996 Changes to Schedule 8.01: Jurisdictions of Incorporation of Borrower and its Subsidiaries. SCI Systems Colorado, Inc., incorporated in the State of Colorado, is a Subsidiary and is hereby added to Schedule 8.01. EXHIBIT E-2 to Credit Agreement SUBSIDIARY (INTERCOMPANY) NOTE $410,000,000 June 28, 1996 FOR VALUE RECEIVED, the undersigned promises to pay to the order of SCI Systems, Inc., a Delaware corporation (the "Parent"), or any subsidiary thereof (a "Subsidiary", and together with the Parent or any other holder hereof, the "Holder") at its registered office in Wilmington, Delaware (or at such other place as the Holder may designate in writing to the undersigned) the principal amount of FOUR HUNDRED TEN MILLION AND NO/100 U.S. DOLLARS ($410,000,000) or so much thereof as has been advanced to the undersigned by each payee hereunder, plus interest as hereinafter provided. The principal amount of this Subsidiary Note shall be due and payable in the amounts and at the times determined by the Holder to be necessary to allow the Parent to make any payment of principal due and payable under the Notes (as such term is defined in the Amended and Restated Credit Agreement (as amended, extended, modified or supplemented from time to time, the "Credit Agreement"), dated as of August 3, 1995, by and among the Parent, Citibank, N.A., as agent (the "Agent"), ABN AMRO Bank N.V., as Co-Agent, and the Banks (the "Banks") which are signatories to such Credit Agreement, and any assignees which become Banks under such Credit Agreement). The undersigned shall pay interest on the principal amount outstanding hereunder from time to time at the effective rate of interest being paid by the Parent under the Notes and the Credit Agreement. Interest hereunder shall be due and payable as and when interest from the Parent is due under the Credit Agreement in an amount determined by the Holder, based on the ratio of the amount outstanding hereunder at the time of any interest payment, to the total amount outstanding under the Credit Agreement from the Parent. Any payment of principal or interest which is not timely made shall bear interest at a per annum rate equal to the interest rate for overdue advances provided in the Credit Agreement. It is contemplated that the original principal sum evidenced by this Subsidiary Note may be reduced from time to time and that additional advances may be made from time to time. In no event shall the amount of interest due or payable hereunder exceed the maximum rate of interest allowed by applicable law, and in the event any such payment is inadvertently paid by the undersigned or inadvertently received by the Holder, then such excess sum shall be credited as a payment of principal, unless the undersigned shall notify the Holder, in writing, that the undersigned elects to have such excess sum returned to it forthwith. It is the express intent hereof that the undersigned not pay and the Holder not receive, directly or indirectly, in any manner whatsoever, interest in excess of that which may be lawfully paid by the undersigned under applicable law. Should any payment of principal and interest not be paid when due under this Subsidiary Note, or should an Event of Default occur under the Credit Agreement or any other document or agreement executed and delivered in connection herewith or therewith, then, and at any time thereafter, the Holder shall have the right and option, in its sole discretion, to declare the principal and interest outstanding hereunder to be forthwith due and payable. All parties now or hereafter liable with respect to this Subsidiary Note, whether the undersigned, any guarantor, endorser or any other person or entity, hereby expressly waive presentation, demand of payment, protest, notice of demand of payment, protest and notice of non-payment, or any other notice of any kind with respect hereto. No delay or failure on the part of the Holder in the exercise of any right or remedy hereunder, under any loan agreement or security agreement, or at law or in equity, shall operate as a waiver thereof, and no single or partial exercise by the Holder of any right or remedy hereunder, under any loan agreement or security agreement, or at law or in equity shall preclude or estop another or further exercise thereof or the exercise of any other right or remedy. Principal and interest on this Subsidiary Note shall be payable and paid in lawful money of the United States of America. Time is of the essence of this Subsidiary Note and, in case this Subsidiary Note is collected by or through an attorney at law, or under advice therefrom, the undersigned agrees to pay all costs of collection including reasonable attorneys' fees. The provisions of this Subsidiary Note shall be construed and interpreted and all rights and obligations of the parties hereunder determined in accordance with the laws of the State of New York. THIS SUBSIDIARY NOTE IS SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN AMENDED AND RESTATED ASSIGNMENT OF INTERCOMPANY LOANS DATED AS OF AUGUST 3, 1995, AS AMENDED, BY AND AMONG THE AGENT, THE UNDERSIGNED AND ITS AFFILIATES. This Note supersedes and replaces that certain Subsidiary (Intercompany) Note dated as of August 3, 1995 executed by the undersigned in favor of the Parent and any Subsidiary in the original principal amount of $320,000,000 (the "Prior Note") and this Note is not intended (and shall not be construed) to be a novation of the indebtedness evidenced by the Prior Note. IN WITNESS WHEREOF, the undersigned has caused this Subsidiary Note to be executed, sealed and delivered by and through its duly authorized representatives, as of the day and year first above written. [NAME OF SUBSIDIARY] By: Name: Title: [END OF EXHIBIT 10(a)(5)] [EXHIBIT 10(b)(2)] FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT THIS FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT, dated as of July 14, 1995 (this "Amendment"), is among SCI TECHNOLOGY, INC., ("Seller"), SCI SYSTEMS, INC. ("Guarantor"), RECEIVABLES CAPITAL CORPORATION ("Purchaser") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as administrative agent for Purchaser (the "Administrative Agent"). BACKGROUND i. Seller, Guarantor, Purchaser and the Administrative Agent, entered into the Receivables Purchase Agreement, dated as of June 30, 1995 (the "Purchase Agreement"). ii. The parties hereto desire to amend the Purchase Agreement in certain respects as set forth herein. NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Definitions. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings assigned thereto in the Purchase Agreement. SECTION 2. Excluded Obligors. The definition of "Excluded Obligors" that appears in Appendix A to the Purchase Agreement is hereby deleted in its entirety. The definition of "Designated Obligor" that appears in Appendix A to the Purchase Agreement is hereby amended by deleting the phrase "Excluded Obligors and" where it appears in the second line thereof. SECTION 3. Eligible Receivable. The definition of "Eligible Receivable" where it appears in Appendix A to the Purchase Agreement is hereby amended by adding to paragraph (a) thereof after the phrase "an Affiliate of Seller" the phrase ", is not a Governmental Authority". SECTION 4. Miscellaneous. Seller hereby agrees promptly to execute and deliver amendments to the Uniform Commercial Code Financing Statements that were filed in connection with the Purchase Agreement in order to reflect the amendments set forth herein. The Purchase Agreement, as amended hereby, remains in full force and effect. Any reference to the Purchase Agreement from and after the date hereof shall be deemed to refer to the Purchase Agreement as amended hereby unless otherwise expressly stated. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of Illinois. This Amendment may be executed in any number of counterparts, and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. RECEIVABLES CAPITAL CORPORATION By: Name Printed: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent By: Name Printed: Title: SCI TECHNOLOGY, INC. By: Name Printed: Title: SCI SYSTEMS, INC. By: Name Printed: Title: [END OF EXHIBIT 10(b)(2)] [EXHIBIT 10(b)(2)] SECOND AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT THIS SECOND AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT, dated as of August 30, 1995 (this "Amendment"), is among SCI TECHNOLOGY, INC., ("Seller"), SCI SYSTEMS, INC. ("Guarantor"), RECEIVABLES CAPITAL CORPORATION ("Purchaser") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as administrative agent for Purchaser (the "Administrative Agent"). BACKGROUND 1. Seller, Guarantor, Purchaser and the Administrative Agent, entered into the Receivables Purchase Agreement, dated as of June 30, 1995, as amended by the First Amendment to Receivables Purchase Agreement, dated as of July 14, 1995 (the "Purchase Agreement"). 2. The parties hereto desire to amend the Purchase Agreement in certain respects as set forth herein. NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Definitions. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings assigned thereto in the Purchase Agreement. SECTION 2. Financial Covenants. Section 7.04(a) of the Purchase Agreement is hereby amended by deleting the phrase "0.8 to 1.0" where it appears in the third line thereof, and substituting therefor the phrase "1.25 to 1.0". Section 7.04(b) of the Purchase Agreement is hereby amended by deleting the phrase "eighty percent (80%)" where it appears therein, and substituting therefor the phrase "seventy percent (70%)". Section 7.04(c) of the Purchase Agreement is hereby amended by deleting the number"1.20" where it appears therein, and substituting therefor the number "1.70". SECTION 3. Schedule B-1. Schedule B-1 to the Receivables Purchase Agreement is hereby deleted in its entirety, and the schedule attached hereto as Schedule B-1 is hereby substituted therefor. SECTION 4. Miscellaneous. Seller hereby agrees promptly to execute and deliver amendments to the Uniform Commercial Code Financing Statements that were filed in connection with the Purchase Agreement in order to reflect the amendments set forth herein. The Purchase Agreement, as amended hereby, remains in full force and effect. Any reference to the Purchase Agreement from and after the date hereof shall be deemed to refer to the Purchase Agreement as amended hereby unless otherwise expressly stated. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of Illinois. This Amendment may be executed in any number of counterparts, and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. RECEIVABLES CAPITAL CORPORATION By: Name Printed: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent By: Name Printed: Title: SCI TECHNOLOGY, INC. By: Name Printed: Title: SCI SYSTEMS, INC. By: Name Printed: Title: [END OF EXHIBIT 10(b)(2)] [EXHIBIT 10(b)(4)] THIRD AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT THIS THIRD AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT, dated as of December 15, 1995 (this "Amendment"), is among SCI TECHNOLOGY, INC., ("Seller"), SCI SYSTEMS, INC. ("Guarantor"), RECEIVABLES CAPITAL CORPORATION ("Purchaser") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as administrative agent for Purchaser (the "Administrative Agent"). BACKGROUND 1. Seller, Guarantor, Purchaser and the Administrative Agent, entered into the Receivables Purchase Agreement, dated as of June 30, 1995, as amended by the First Amendment to Receivables Purchase Agreement, dated as of July 14, 1995 and the Second Amendment to Receivables Purchase Agreement, dated as of August 30, 1995 (the "Purchase Agreement"). 2. The parties hereto desire to amend the Purchase Agreement in certain respects as set forth herein. NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Definitions. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings assigned thereto in the Purchase Agreement. SECTION 2. Purchase Limit. Section 1.02(a) of the Purchase Agreement is hereby amended by deleting the number "$100,000,000" where it appears therein and substituting therefor the number "$150,000,000". SECTION 3. Special Concentration Limit. Schedule 2.04(c) of the Purchase Agreement is hereby amended with respect to Hewlett-Packard Company by (i) inserting the words "Commercial Paper/" in the heading of the second column of Schedule 2.04(c) so that the heading reads in its entirety as follows "Commercial Paper/Short Term Debt Rating*", (ii) deleting the phrase "or better" in the first line of the column labelled "Commercial Paper/Short-Term Debt Rating" thereon and (iii) adding a new first line to each of the columns labelled "Commercial Paper/ Short-Term Debt Rating" and "Special Concentration Limit", respectively, as follows: A1+/P1 50% SECTION 4. Schedule 6.01(k) of the Purchase Agreement is hereby deleted in its entirety and Schedule 6.01(k) in the form attached hereto as Exhibit A is hereby substituted therefor. SECTION 5. Representations and Warranties. Each of Seller and Guarantor hereby represent and warrant that the representations and warranties set forth in Sections 6.01 and 6.02, respectively, are true and correct on and as of the date hereof, after giving effect to this Amendment, except to the extent they relate only to an earlier date, and shall be deemed to have been made on and as of the date hereof as if fully set forth herein, except to the extent they relate only to an earlier date. SECTION 6. Effectiveness. This Amendment shall become effective, as of the date hereof, upon receipt by the Administrative Agent of (i) certified resolutions of each of Seller and Guarantor approving the execution, delivery and performance of this Amendment; (ii) the written consent of the Liquidity Banks to this Amendment; and (iii) the fee payable by Seller to the Administrative Agent pursuant to the letter from the Administrative Agent to Seller dated as of December 15, 1995. SECTION 7. Miscellaneous. The Purchase Agreement, as amended hereby, remains in full force and effect. Any reference to the Purchase Agreement from and after the date hereof shall be deemed to refer to the Purchase Agreement as amended hereby unless otherwise expressly stated. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of Illinois. This Amendment may be executed in any number of counterparts, and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. RECEIVABLES CAPITAL CORPORATION By Name Printed: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent By: Name Printed: Title: SCI TECHNOLOGY, INC. By: Name Printed: Title: SCI SYSTEMS, INC. By: Name Printed: Title: [END OF EXHIBIT 10(b)(4)] [EXHIBIT 10(b)(5)] FOURTH AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT THIS FOURTH AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT, dated as of April 1, 1996 (this "Amendment"), is among SCI TECHNOLOGY, INC., ("Seller"), SCI SYSTEMS, INC. ("Guarantor"), RECEIVABLES CAPITAL CORPORATION ("Purchaser") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as administrative agent for Purchaser (the "Administrative Agent"). BACKGROUND 1. Seller, Guarantor, Purchaser and the Administrative Agent, entered into the Receivables Purchase Agreement, dated as of June 30, 1995, as amended by the First Amendment to Receivables Purchase Agreement, dated as of July 14, 1995, the Second Amendment to Receivables Purchase Agreement, dated as of August 30, 1995 and the Third Amendment to Receivables Purchase Agreement, dated as of December 15, 1995 (the "Purchase Agreement"). 2. The parties hereto desire to amend the Purchase Agreement in certain respects as set forth herein. NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Definitions. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings assigned thereto in the Purchase Agreement. SECTION 2. Purchase Limit. Section 1.02(a) of the Purchase Agreement is hereby amended by deleting the number "$150,000,000" where it appears therein and substituting therefor the number "$200,000,000". SECTION 3. Representations and Warranties. Each of Seller and Guarantor hereby represent and warrant that the representations and warranties set forth in Sections 6.01 and 6.02, respectively, are true and correct on and as of the date hereof, after giving effect to this Amendment, except to the extent they relate only to an earlier date, and shall be deemed to have been made on and as of the date hereof as if fully set forth herein, except to the extent they relate only to an earlier date. SECTION 4. Effectiveness. This Amendment shall become effective, as of the date hereof, upon receipt by the Administrative Agent of (i) certified resolutions of each of Seller and Guarantor approving the execution, delivery and performance of this Amendment; (ii) the written consent of the Liquidity Banks to this Amendment; and (iii) the fee payable by Seller to the Administrative Agent pursuant to the letter from the Administrative Agent to Seller dated as of April 1, 1996. SECTION 5. Miscellaneous. The Purchase Agreement, as amended hereby, remains in full force and effect. Any reference to the Purchase Agreement from and after the date hereof shall be deemed to refer to the Purchase Agreement as amended hereby unless otherwise expressly stated. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of Illinois. This Amendment may be executed in any number of counterparts, and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. RECEIVABLES CAPITAL CORPORATION By: Name Printed: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent By: Name Printed: Title: SCI TECHNOLOGY, INC. By: Name Printed: Title: SCI SYSTEMS, INC. By: Name Printed: Title: [END OF EXHIBIT 10(b)(5)] [EXHIBIT 10 (c) (1)] SUMMARY OF DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICIES Primary Coverage: Carrier: Fidelity and Casualty Insurance Company Coverage: $5,000,000 Deductibles: None Policy Number: DNO 002 (5/93) Policy period: 8/01/95 to 10/01/96 Secondary Coverage: Carrier: St Paul Surplus Lines Insurance Company Coverage: $5,000,000 Deductibles: $175,000 Policy Number: 6357 Policy period: 8/01/95 to 10/01/96 [END OF EXHIBIT 10 (c) (1)] EX-11 3 PRIMARY AND FULLY DILUTED EARNINGS PER SHARE EXHIBIT 11 - COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE (In thousands of dollars except number of shares and per share amounts) Year Ended:
June 30, June 30, June 30, 1996 1995 1994 Primary Earnings Per Share Income from continuing operations $ 80,955 $ 45,243 $29,936 Loss from discontinued operations -0- -0- (8,775) --------------------------------------------- Net income 80,955 45,243 21,161 Add back after-tax interest expense for debentures converted 218 N/A N/A --------------------------------------------- Adjusted net income used in primary computation $ 81,173 $45,243 $21,161 ============================================== Weighted average number of shares outstanding during period 29,467,359 27,334,551 27,138,945 Applicable number of shares for common stock equivalents (stock options) outstanding for period, using Treasury Stock Method based on average market price for period 673,113 486,247 564,218 -------------------------------------------- Weighted average number of shares used in computation 30,140,472 27,820,798 27,703,163 ============================================= Primary earnings per share: From continuing operations $2.69 $1.63 $1.08 From discontinued operations -0- -0- (.32) ------------------------------------------- Net income $2.69 $1.63 $ .76 =========================================== Fully Diluted Earnings Per Share Income from continuing operations $80,955 $45,243 (A) Loss from discontinued operations -0- -0- --------------------------- Net income 80,955 45,243 Add back after-tax interest expense for debentures converted 218 N/A Add back after-tax interest expense for outstanding convertible subordinated notes and debentures 1,657 1,339 -------------------------- Adjusted net income used in fully diluted computation $82,830 $46,582 =========================== Weighted average number of shares outstanding during period 29,467,359 27,334,551 Applicable number of shares for common stock equivalents (stock options) outstanding for period, using Treasury Stock Method based on period ended market price 686,712 639,676 Number of shares to be issued if convertible subordinated notes and debentures were converted 1,111,812 1,850,344 ---------------------------- Weighted average number of shares used in computation 31,265,883 29,824,571 ============================ Fully diluted earnings per share: From continuing operations $2.65 $1.56 From discontinued operations -0- -0- --------------------------- Net income $2.65 $1.56 ============================ (A) The potential conversion of the convertible debentures were anti-dilutive for this period.
EX-13 4 1996 ANNUAL REPORT TO SHAREHOLDERS [EXHIBIT 13] BEGINNING OF 1996 ANNUAL REPORT TO SHAREHOLDERS (INSIDE FRONT COVER OF 1996 ANNUAL REPORT TO SHAREHOLDERS) SCI SYSTEMS, INC. Annual Report 1996 The Company SCI Systems, Inc. is a diversified, international electronics manufacturer with multibillion dollar annual sales. It designs, manufactures, markets, distributes, and services electronic products principally for the computer, aerospace, defense, telecommunications, medical, and entertainment industries, as well as the U.S. Government. SCI, the world's largest electronics manufacturing services provider, operates the largest surface mount technology (SMT) production capacity in the merchant market. The Company conducts its operations through a Commercial Division and a Government Division. The Commercial Division operates five geographically organized business units: the Eastern, Central, and Western Regions in North America and the European and Asian Regions. Serving a large and diversified customer base throughout the world, the Regions operate multiple plants which manufacture components, subassemblies, and finished products, primarily for original equipment manufacturers. The Regions also offer a wide range of design, engineering, purchasing, distribution, and support services. The Government Division provides data management, instrumentation, communication, and computer systems and subsystems to the U.S. Government and its prime contractors, and to several foreign governments. Although the Company derives a majority of its revenues from hardware manufacturing and maintains a broad technology base, it is primarily a vertically integrated engineering and manufacturing services provider with dedication to close customer interaction forming the cornerstone of its activities. The key elements of SCI's operating philosophy -- quality products, competitive pricing, and customer responsiveness -- are a proven foundation for success and will continue to guide the Company as it addresses its growth opportunities. - -------------------------------------------------------------- Picture of the Company's new mainframe computer - -------------------------------------------------------------- Information Systems The Company continues to place emphasis upon enhancing its information systems. During fiscal 1996 significant upgrades and expansions of system hardware and software were implemented at the mainframe, server, and desktop computer levels. A significant event was the purchase of a new mainframe computer. A latest generation IBM System/390 Processor was installed. Its CMOS (Complementary Metal-Oxide Semiconductor) technology is the basis for a parallel architecture which will provide a high level of modularity to readily and economically support dynamic future growth, while enhancing performance and reliability with major savings in energy, facilities, and maintenance costs. The latest mainframe operating system software was also acquired for a phased conversion during fiscal year 1997. Continued evolution of new systems applications at the plant and headquarters levels is an important driver of Company infrastructure development. [PAGE 1 OF ANNUAL REPORT TO SHAREHOLDERS] Financial Highlights Annual Report for the Year ended June 30, 1996 (Dollars in thousands except for per share data) No cash dividends were declared in the periods presented. 1992 to 1993 amounts have been restated for 1994's discontinued operations. (See Part II, Items 7 and 8 of Excerpts from Form 10-K for Fiscal 1996, bound herein.) 1996 1995 1994 1993 1992 Net Sales $4,544,759 $2,673,783 $1,852,478 $1,672,115 $1,038,454 Income from Continuing Operations 80,955 45,243 29,936 30,615 9,061 Per Common Share (Fully Diluted) 2.65 1.56 1.08 1 .21 .43 Net Income 80,955 45,243 21,161 26,559 3,825 Per Common Share (Fully Diluted) 2.65 1.56 .76 1.07 .18 Interest Expense 25,907 18,400 15,423 16,793 15,479 Taxes on Income from Continuing Operations 55,103 30,418 16,980 12,268 (2,259) Total Assets 1,283,195 981,292 920,212 780,339 612,962 Borrowings 343,738 162,090 284,283 253,341 224,876 Cash and Cash Equivalents 46,493 10,277 35,822 15,846 38,722 Working Capital 549,650 280,124 395,628 336,516 255,270 Capital Expenditures 109,912 80,316 46,488 84,084 29,822 Depreciation and Amortizaon 60,972 49,839 48,623 41,303 38,682 Net Property, Plant, and Equipment 264,054 214,025 182,768 184,032 143,687 Shareholders' Equity 472,261 349,776 304,634 277,856 192,349 Per Common Share 15.96 12.75 11.16 10.27 9.17 New Orders Received 5,248,926 3,574,820 2,074,205 1,922,366 1,150,708 Order Backlog $2,840,003 $2,135,836 $1,234,800 $1,013,073 $762,822 Common Shares Outstanding 29,592,212 27,435,992 27,306,099 27,050,282 20,977,670 Employees 15,524 13,185 12,027 10,811 9,512 Sales ($) Per Employee 316,609 212,104 162,228 164,554 107,757 Manufacturing Plants 21 20 19 18 17 Facility Square Footage 3,510,000 3,021,600 2,834,000 2,745,000 2,678,000 Sales ($) Per Square Foot 1,392 913 664 619 396 Automated Assembly Lines 198 169 154 139 109 Pin-in-Hole Technology 43 40 42 38 34 Surface Mount Technology 155 129 112 101 75 Asset Turnover Ratio 4.0 2.8 2.2 2.4 1.8
- ----------------------------------------------------------------------- 4 Bar Charts of New Orders Received, Net Sales, Order Backlog and Total Assets - ----------------------------------------------------------------------- [PAGE 2 OF ANNUAL REPORT TO SHAREHOLDERS] Executive Letter To the Shareholders: The fiscal year ended June 30, 1996 was one of remarkable progress for SCI Systems, Inc. Excellent sales and earnings growth were achieved. A multifaceted financing program provided increased liquidity. A major plant was acquired and two plant expansions were constructed. Equipment addition was continued. Internal systems and personnel were upgraded. Importantly, the Company focused upon planning for, and investing in, ongoing growth. Revenues. Sales for the year were $4.545 billion, 70% above the $2.674 billion of the prior year, in spite of markedly lower component prices. Favorable market conditions, strong customer relationships, and timely availability of capacity each contributed to the rapid revenue expansion. The overall electronic equipment market in which SCI participates is estimated to be above $400 billion in size and is growing at a rate in excess of 10% per year. The electronic manufacturing services (EMS) industry which SCI leads is estimated to be above $40 billion in size and is growing at a rate in excess of 20% per year. SCI has approximately an 11% market share and is growing at more than 40% per year. This growth environment is a vigorous one in which the Company is performing well. Income and Returns. Net income for the year was $81 million, 79% above $45 million a year earlier. Primary earnings per share were $2.69 compared to $1.63 in the prior year; fully diluted earnings per share were $2.65, 70% above $1.56 in the previous year. Operating margin for the year increased by ten basis points in spite of adverse product mix shift. Return on average shareholders' equity for the year was 19.7%, compared to 13.8% in the prior year. Return on equity was 21.3% in both the second and fourth quarters, reaching the 20% plus level which has been an important Company profitability objective. Orders and Backlog. New orders received during the year were $5.249 billion compared to $3.575 billion in fiscal 1995. Incoming orders exceeded a billion dollars for six consecutive quarters. Year-end order backlog stood at $2.840 billion compared to $2.135 billion a year earlier. Ending backlog reflected the effects of much shortened component lead times and significantly lower average selling prices. While semiconductor industry book-to-bill ratios have fallen below unity, SCI's fiscal 1996 book- to-bill ratio was a healthy 1.15. Balance Sheet. Asset turnover (the ratio of revenues to total assets) continued to receive close management attention during the year. Asset turnover for fiscal 1996 was 4.0 as compared to 2.8 in the prior year. The 4.0 level has been a key continuous improvement goal and was achieved a full year ahead of plan. Days of sales outstanding in every asset category were reduced with favorable effect on working capital needs. Improved asset turnover was the primary contributor to return on equity improvement. Major growth opportunities, coupled with a rising stock price, prompted the Company to implement a multielement financing program during the second half of the year. A $287.5 million convertible note issue was sold; revolving credit, commercial paper, and asset securitization facilities were upsized by a total of $165 million; and a $100 million issue of senior notes was marketed. (With the successful closing of the senior note issue, July 1996 available liquidity reached $761 million.) All balance sheet ratios were well within their target ranges. Facilities and Equipment. During the fourth quarter the Company acquired a modern and well- equipped 360,000 square foot facility in Fountain, Colorado, from Apple Computer. A 75,000 square foot building addition was constructed in Colorado Springs, Colorado, and a 35,000 square foot building addition was completed in Guadalajara, Mexico. A site was acquired and construction begun of a new 110,000 square foot first phase building in Penang, Malaysia; when completed in December 1996 it will be the Company's twenty-second plant. Construction of a 50,000 square foot addition was begun in Irvine, Scotland, for fall 1996 completion. Preliminary work was set in motion for an additional plant expansion and establishing SCI's twenty-third plant, both at international locations. Twenty-six surface mount technology and three pin-in-hole automated assembly lines were added during the year. Infrastructure and capacity investment kept pace with planned growth through record capital expenditures of $110 million ($49 million in excess of depreciation and amortization). Product Mix. For several years the proportion of SCI's revenues derived from finished products (as opposed to subassemblies) has steadily increased. In fiscal year 1996 shipment of finished products [PAGE 3 OF ANNUAL REPORT TO SHAREHOLDERS] increased to 44% of total sales. Finished product manufacturing is typically characterized by higher asset turnover ratios and lower operating margins. While restricting operating margin growth, mix shift has clearly assisted in attaining the asset turnover ratio and return on equity goals which management consider most important. It is perceived that the investment community's sometimes single-minded focus on operating margins per se is steadily being eroded by competitive reality. Personnel. Company employment grew 18% in fiscal 1996, to 15,524, while supporting 70% revenue growth. (Sales per employee grew 50% to $316,609.) Several new officers were elected during the year to the position of Vice President. They include: James P. Bilodeau, Warren F. Cline Jr., Robert P. Eisenberg, David L. Lengel, Joseph A. Tilmant, John R. Wilkins, Jr., and F. M. Wong. Expansion Strategy. The Company has a variety of growth opportunities. Numerous new programs are emerging for which SCI will compete. They include both subassembly and finished product projects from a variety of existing and new customers. The majority of these can be accommodated with existing plant infrastructure but from time to time capacity will need to be supplemented by "brick and mortar" additions. Two such projects were built in fiscal 1996; two such projects are planned for fiscal 1997. From time to time opportunities also present themselves which require "green field" plants to serve new markets or to address specific programs. Such a plant is scheduled for completion in Malaysia in fiscal 1997; two additional ones are being planned for fiscal 1998. Several other sites are under study as candidates for future expansions at geographic locations consistent with low-cost production. As most young industries mature, a consolidation process evolves. Such consolidation is in progress in the EMS industry and presents a number of acquisition options. In general the Company will be very cautious about these because of the goodwill premiums associated with the quality ones and the problems associated with those of lesser quality. SCI's management strongly believes the key to its future success is maintaining and enhancing its status as a low-cost producer. Most of the "consolidation" acquisition candidates simply do not have the low-cost structures required to justify sizable premiums over book value. As the trend to outsourcing continues to accelerate, large original equipment manufacturers (OEMs) are expected to accelerate their shedding of capacity. SCI has now made five successive "divestiture" acquisitions (from Control Data, Tandem Computer, Hewlett-Packard, Digital Equipment, and Apple Computer). Such acquisitions generally involve sizable ongoing business, excellent management, well-trained work forces, partially depreciated facilities, and little or no goodwill. If the plant locations are suitable, these can be excellent vehicles for growth. SCI's size and experience make it a logical choice as a "divestiture" acquirer and a variety of candidates are expected to emerge for the Company's evaluation. Outlook. The "outlook" paragraph of this letter in 1994 remains as valid today as it was one and two years ago. It is thus again reiterated: "The macro industry trend towards outsourcing in general continues to develop in SCI's best interest. Additional trends to finished product outsourcing and increased supplier participation in engineering and distribution likewise favor SCI. The Company's now proven capabilities in "lot size of one" custom manufacturing are unique and are expected to lead to significant new programs. Demand for small computers and new multimedia and interactive systems is expected to continue to provide high industry unit volume growth, accompanied by unrelenting price emphasis that will favor low-cost producers such as SCI. Although its markets are becoming increasingly competitive, the Company has a broad customer base, good order momentum, a record high backlog, well-positioned facilities, modern equipment, and an excellent staff with which to address market pressures. The Company's management looks forward with anticipation to capitalizing upon the opportunities ahead." SCI did well with its opportunities in fiscal years 1995 and 1996. Although recent growth rates are obviously not sustainable, continued growth and much progress lie ahead. /s/ Olin B. King /s/ A. Eugene Sapp, Jr. Olin B. King A. Eugene Sapp, Jr. Chairman of the Board and President and Chief Executive Officer Chief Operating Officer [PAGE 4 OF ANNUAL REPORT TO SHAREHOLDERS] Government Division The Government Division provides specialty hardware and services to U.S. and foreign governments, defense and aerospace companies, and others requiring high-performance equipment. Its primary facilities are located in Huntsville and Lacey's Spring, Alabama. The Division designs and manufactures electronic and electromechanical systems and subsystems for launch vehicle, satellite, aircraft, and surface applications. During the year production continued on mission critical voice and communications control systems for the F-15, F-16, F-18, and AV-8 aircraft and the Government's Global Positioning System (GPS) User Equipment. Digital audio intercommunications equipment for the V-22 Osprey tilt rotor helicopter and the C-130J Hercules transport aircraft entered production and a contract was received to adapt this technology for use on the RAH-66 helicopter. A new development contract was also received for the Integrated Digital Operator Control System for the Army's Patriot Missile. The Communications Interface Unit for the Apache helicopter is nearing the start of long-term production. The Company continues to produce the Advanced Interference Blanker Unit, a special purpose processor for the F-16 aircraft. The first development units of the System and Weapons Processors for the Apache Longbow helicopter have been delivered; these computers are expected to be the Division's largest ever production program. Production began of a work station for the U.S. Navy, a nonvolatile memory system for the Japanese F-2 and USAF F-16 aircraft, and the Threshold Memory Unit for the DSP satellite. SCI provides the Air Force's standard Advanced Airborne Test Instrumentation System. This system is in ongoing production and development activities are focused on a number of enhancements for future applications. Production was started during the year of the Digital Data Acquisition System for the Titan Launch vehicle. A number of additional ongoing programs have resulted from broad application of the Division's technologies. Product examples are fiber bobbins, gunner's consoles and local area networks for the U.S. Army Enhanced Fiber Optic Guided Missile; ARINC-629 Current Mode Couplers and Standard Interface Modules for the fly-by-wire Boeing 777 aircraft; Lighting Control Units for the C130H aircraft; proofing printers for the graphic arts industry; and chemical cabinets and wet process equipment for semiconductor manufacturing. Contract manufacturing expanded in missile electronics, transportation products, and ruggedized portable computer assemblies. The Division's engineering resources continue to support a number of Commercial Division customers from which company-wide growth is expected. - ---------------------------------------------------------------------------- Three pictures on the page with the captions: 1.) Automated systems test completed user equipment for the U.S. military's Global Positioning System. 2.) Production has begun of a new line of color proofing printers for the graphic arts industry. 3.) High-density electronic assemblies populate the Weapons Processor for the Apache Longbow helicopter. - ----------------------------------------------------------------------------- [PAGE 5 OF ANNUAL REPORT TO SHAREHOLDERS] Commercial Division The Commercial Division conducts the Company's mainstream commercial activities. Its multinational business is organized into plant groups within five geographical regions: the Central, Eastern, and Western Regions of North America, the Asian Region, and the European Region. SCI is the leading international supplier of manufacturing and engineering services to the electronics industry. It is benefiting from the ongoing shift to outsourcing as original equipment manufacturers (OEMs) seek solutions to the problems of rapid change in manufacturing technologies, new product proliferation, shortened product life cycles, intense cost pressures, and heightened user reliability and quality expectations. In response the Commercial Division performs computer-aided design, component procurement and test, subassembly and finished unit production, software development, product test, distribution, after sales service, and a full range of engineering support for a sizable number of customers. The Company is expert in the automation of traditional pin-in-hole (PIH) electronics assembly using printed circuit boards and leaded components. Although conceptually several decades old, there remains a significant, continuing market for this technology. SCI operates a total of 43 automated PIH assembly lines in its various plants. Surface mount technology (SMT) is the assembly technique of current preference. It offers smaller size, lower cost, and higher reliability. Barriers to entry into SMT are high, as it is process sensitive, design critical, and capital intensive. The Company currently operates 155 automated SMT assembly lines in eight countries, making SCI one of the highest capacity producers in the world and clearly the leader in the merchant market. The Company remains committed to the latest manufacturing technologies. Ongoing equipment additions focus on evolving SMT processes. Capabilities for a range of emerging microelectronic assembly processes are now operational. An expanded number of production lines for finished product assembly, burn-in, and test are operational to meet a growing number of customers' requirements, including rapid direct shipment to customers. SCI anticipates significant growth, as well as company-wide deployment, of these capabilities. Quality programs remain a key focus. All of the Company's plants are certified to the rigorous quality requirements of the International Organization for Standardization (ISO 9002). Engineering intensive plants additionally comply with ISO 9001. - ----------------------------------------------------------------------------- Picture with the caption: SCI operates 155 automated Surface Mount Technology (SMT) assembly lines around the world. - ----------------------------------------------------------------------------- [PAGE 6 OF ANNUAL REPORT TO SHAREHOLDERS] Central Region The Central Region operates plants in Huntsville and Arab, Alabama, and Guadalajara, Mexico. The plants serve customers from the Southeastern and Southwestern U.S. and Latin America. Nonregional customers are attracted to Mexico as a low-cost manufacturing alternative and to the Region's expanding final assembly and distribution capabilities. One Huntsville plant serves a diversified customer base with electronic assemblies and a mix of finished products. Certification to Food and Drug Administration standards is important to its success as a supplier of medical devices and instruments. Its active contracts are in the computer, telecommunications, medical product, and digital television arenas. The plant continues to experience considerable growth in final assembly activities including the production of video terminals and networked client computers, patient monitoring equipment, modem products, and digital television reception units. This plant is also one of the Company's primary technology development centers. A second Huntsville plant provides a full range of design, engineering support, manufacturing, and distribution services. The Company's rapid growth has been aided by this plant's innovative personal computer products which are brought to market in minimum time, custom manufactured in large volumes, and shipped directly to multiple market channels as well as directly to end users. SCI's systems, which process orders electronically, track all manufacturing activities on line, and support direct shipment to customers have proved important to the success of finished product activities. The business base for this plant has resulted in subassembly and finished product work for several other SCI plants. The Huntsville plant provides domestic manufacturing of personal computers and serves as the engineering lead activity supporting other SCI plants at both domestic and international manufacturing sites. The Arab plant has long been a leading producer of high-volume electronic assemblies. This plant is also a key supplier of the subsystem electronics for the finished products produced in other plants. The facility was selected during the year to manufacture and distribute personal computers for a major new customer's retail channel. This product family, which will be marketed in North America, Europe, and Asia, represents an attractive multinational growth opportunity for SCI. The Guadalajara plant has grown rapidly due to increased demand from existing customers and the addition of new ones. The plant produces electronic assemblies for computers, printers, modems, scanners, and digital television receivers. It was expanded during the year and equipment additions have raised the plant's SMT capacity to the largest in the Company. The attractiveness of this low-cost manufacturing location, coupled with the plant's excellent record, is expected to lead to further expansion during fiscal 1997. - ----------------------------------------------------------------------------- Two pictures with the captions: 1.) The Central Region produces thousands of multimedia personal computers each day for a major customer. 2.) Sophisticated blood glucose meters for diabetics are manufactured in an FDA approved facility. - ----------------------------------------------------------------------------- [PAGE 7 OF ANNUAL REPORT TO SHAREHOLDERS] - -------------------------------------------------------------------------------- Three pictures with the captions: 1.) Hundreds of thousands of a major customer's personal computers are produced for direct distribution. 2.) Automated equipment performs exhaustive tests on complex computer assemblies in high-volumes. 3.) Digital television receivers for satellite direct broadcast to the home are aligned before shipment. - -------------------------------------------------------------------------------- [PAGE 8 OF ANNUAL REPORT TO SHAREHOLDERS] Eastern Region The Eastern Region has well-established plants in Graham, North Carolina; Hooksett, New Hampshire; Dorval, Quebec, Canada; and Augusta, Maine. The Region serves customers in the Eastern United States and Canada. The North Carolina facility has continued to focus on manufacturing Local Area Network (LAN) and Wide Area Network (WAN) interfaces, routers, and bridges. Office products and automotive electronics have emerged as significant plant activities with high-growth potential. Growth has also resulted from an increase in outsourcing by major telecommunications companies. The plant is noted for its process innovations in support of its customers' new products. The New Hampshire plant serves the electronics community of the Boston area as well as others throughout the Northeast. The markets for communications products, computers and related peripheral devices, and medical instruments offer significant opportunity for this plant as well as the Company. The recovery of the New England electronics industry has fueled steady growth for the plant's existing customers. Growth remains strong with successful emerging companies which require a responsive and flexible contract manufacturing source. The plant has successfully coordinated the transfer of numerous products and customers to other SCI plants for customers' expanding requirements for worldwide capacity. A key strength of the plant will be the continued development of regional customers and the transition of manufacturing to other SCI plants when appropriate. The Augusta, Maine, plant acquired from Digital Equipment Corporation in late fiscal 1995, experienced growth from its major customer's North American requirements and also supported new product start-ups at the customer's international plants. The plant's technical depth supports a high mix of complex products during all stages of a product's life cycle. The plant is ideally suited for the final assembly activities which will be targeted for growth at this location. The Canadian facility is growing, with requirements coming from an expanding number of Canadian customers as well as multinational customers requiring Canadian content. The plant continues to provide a variety of computer assemblies, interface devices, and data and voice telecommunications equipment. The plant has experienced a significant increase in its business with large telecommunications equipment providers which remain a focus area. - ------------------------------------------------------------------------------ Captions for pictures on page 8 and page 9: Opposite page: Statistical control systems provide real time analysis to ensure highest production quality. [PAGE 9 OF ANNUAL REPORT TO SHAREHOLDERS] Left: Interface cards for notebook computers require very high-density surface mount technology. Below: Complex telecommunications products are produced in the Company's Augusta, Maine, facility. - ------------------------------------------------------------------------------ [PAGE 10 OF ANNUAL REPORT TO SHAREHOLDERS] Western Region SCI's rapidly expanding Western Region provides a broad range of manufacturing and engineering services from its five manufacturing plants located in California, Colorado, and South Dakota. The Western Region's plants in San Jose and Watsonville, California, are ideally located to serve the strategic West Coast and Pacific Northwest markets. The Watsonville facility, located just 50 miles from the concentrated high-technology activities of Silicon Valley, continues to serve its large principal customer while focusing on new product introductions for that customer and diversification of the plant's customer base. The San Jose plant, located in the heart of the Silicon Valley, is uniquely positioned to serve its customers directly or in cooperation with other SCI plants in Asia, Europe, or other North American locations. The San Jose plant is recognized for excellence in front-end design support, prototyping, and quantity manufacturing covering low-volume/high mix and high-volume/low mix requirements. Rocky Mountain and Midwestern markets are supported from plants in Colorado Springs, Colorado, and Rapid City, South Dakota. To accommodate rapid growth from a number of customers located along the Front Range of Colorado, the Colo- [PAGE 11 OF ANNUAL REPORT TO SHAREHOLDERS] rado Springs plant was almost doubled in size during the year. The Company is well positioned to meet the rapidly expanding requirements of its growing customer base at this location. In the fourth quarter SCI acquired Apple Computer's Fountain, Colorado, manufacturing plant and entered into a multiyear agreement to provide both circuit board assemblies and finished systems for Apple's North American desktop and notebook markets. The plant adds significant new capacity in SMT manufacturing and final assembly to the Company. Its expertise in notebook computers is of strategic importance to SCI's objectives in serving the notebook segment of the personal computer market. The Rapid City plant has continued its strong performance in manufacturing technology leadership and customer service. Sophisticated products utilizing increasingly high pin count Ball Grid Array (BGA) devices are produced in volume at this location. Additionally, this plant has continued its product diversification strategy by expanding from a wide variety of computer and computer related products into the medical and industrial control markets. - --------------------------------------------------------------------------- Captions for pictures on pages 10 and 11: Systems boards for Macintosh computers are produced in quantity in Fountain, Colorado. Highly automated production machinery operates around the clock for maximum efficiency. Notebook personal computers combine powerful functions with light weight and ease of portability. Process control and product quality are enhanced by x-ray inspection equipment. - ------------------------------------------------------------------------------- [PAGE 12 OF ANNUAL REPORT TO SHAREHOLDERS] Asian Region The Asian Region operates facilities in the Republic of Singapore and Pathum Thani Province, Thailand, a suburb of Bangkok. A third Asian facility is under construction in Malaysia's Penang State. These facilities support regional customers from Japan to Indonesia as well as U.S. and European multinationals that desire Asian sources of manufacturing. The Singapore plant achieved excellent operating results during the year due to strong demand from existing multinational computer and communications customers. The plant also won substantial new business from modem, printer, and copier OEMs. Memory module manufacturing continued successfully with the addition of new customers and capacity grew to approximately one million assemblies per month. The plant received a Government grant to enhance its physical and human resources in product development activities. Initial development efforts in support of local and multinational customers include modem, multimedia, and storage product designs. The Singapore plant continued to enhance its management [PAGE 13 OF ANNUAL REPORT TO SHAREHOLDERS] and manufacturing process efficiencies to improve its Asian competitiveness despite the maturing of the Singaporean economy. The Thailand plant's rapid growth rate of previous years leveled off as a result of consolidation within its disk drive customer base. New customers and markets were aggressively pursued including power management, automotive, telecommunications, and Internet appliances for the Japanese, Thai, European, and U.S. markets. These opportunities will provide future diversification and independence from periodic downturns within single markets. The new Penang facility will initially include 110,000 square feet of floor space and construction is expected to be complete by the end of calendar 1996. The building's expandable design will be suitable for the manufacture of both printed circuit board assemblies and finished products. This green field facility will complement SCI's current operations in Singapore and Thailand by providing cost-effective capacity for a growing customer base in Malaysia while addressing export opportunities to Japanese, Taiwanese, European, and U.S. markets. - ------------------------------------------------------------------------------ Captions for pictures on pages 12 and 13: 1.) Automated in-process handling equipment reduces labor requirements to a minimum. 2.) In-line inspection compliments process controls to ensure high levels of quality. 3.) Memory components are assembled into subsystems in high quantities. 4.) A multifunction placement machine handles odd-form surface mount technology components. - ------------------------------------------------------------------------------ [PAGE 14 OF ANNUAL REPORT TO SHAREHOLDERS] European Region The European Region operates facilities in Irvine, Scotland; Fermoy, County Cork, Ireland; and Grenoble, France. These plants continue to serve respective in-country customers while collectively supporting large multinationals' European operations and local customers throughout Continental Europe and Scandinavia. The Scottish plant has a long history of supplying a wide range of computer assemblies and finished products. During the year significant growth occurred in the plant's mobile and fixed telecommunications business. Other business from new customers included producing monitor and network assemblies and establishing the plant as a European manufacturing source for a major medical equipment company. Military business was also introduced to the plant for the first time in support of a Government Division foreign sales initiative. A facility expansion is currently under construction to house efficient finished product assembly capability to support the European market for a variety of product types. The Region's Design Center, also located in Irvine, provides product development support and engineering services to the European Market. Existing and new customers benefit from this Center's design-for-cost and design-for-manufacturability and testability expertise. Customers served participate in the consumer, automotive, medical, computer and telecommunications industries. The Irish plant continued diversification of its subassembly customer base and now serves customers in the computer, medical, telecommunications, and consumer product markets. During the year the plant began final assembly of personal computers on a build to order basis for a U.S.-based multinational also being served by one of SCI's U.S. plants. The Company's internal systems, which have successfully supported finished product assembly in the U.S., have been transferred and installed and production has commenced. The French facility continued to serve multiple divisions of its established major customer with both manufacturing and new product introduction engineering services. The plant has introduced a range of new customers in the automotive, telecommunications, industrial, and instrumentation market sectors. The plant's activities have also broadened into systems integration as an addition to its traditional SMT production business. The European Region is well-positioned to support anticipated growth in outsourcing by global OEMs operating in Europe and by European OEMs seeking lower costs, increased flexibility, and other benefits of manufacturing outsourcing. - ------------------------------------------------------------------------------- Captions for pictures on pages 14 and 15: 1.) Finished personal computers are produced in the Company's Fermoy, County Cork, Ireland facility. 2.) Latest generation computer-aided design systems speed product design and reduce time-to-market. 3.) Traditional assembly technologies have been highly refined to reduce manufacturing cost. 4.) Computerized automatic test equipment monitors product quality and performance at various stages of production. - ------------------------------------------------------------------------------- [PAGE 16 OF ANNUAL REPORT TO SHAREHOLDERS] Facility Additions - ------------------------------------------------------------------------------- Captions for pictures: 1.) The Colorado Springs, Colorado, facility was expanded to 155,000 square feet during the year. 2.) The Guadalajara, Mexico, facility was expanded to 121,000 square feet during the year. 3.) A 360,000 square foot plant in Fountain, Colorado, was purchased from Apple Computer in June 1996. 4.) An Irvine, Scotland, facility addition of 50,000 square feet was in progress at year-end. 5.) The 110,000 square foot first phase of a new Penang, Malaysia, facility was in progress at year-end. - ------------------------------------------------------------------------------ [BEGINNING OF EXCERPTS FROM FORM 10-K FOR THE YEAR ENDED JUNE 30, 1996] [PAGE 1 OF EXCERPTS FROM FORM 10-K] EXCERPTS FROM FORM 10-K FOR FISCAL 1996 (Except for the parts of SCI Systems, Inc. Annual Report to Shareholders expressly incorporated in the Form 10-K by reference, the Annual Report to Shareholders is not to be deemed filed with the Securities and Exchange Commission) SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [...X...] ANNUAL REPORT TO SHAREHOLDERS PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1996 -- Commission File No. 0-2251 SCI SYSTEMS, INC. (Exact name of registrant as specified in its charter) PART I Item 1. Business. See inside front cover and pages 4 to 14 of the 1996 Annual Report to Shareholders ("Annual Report to Shareholders"), incorporated herein by reference. This document contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995 including, without limitation, statements regarding backlog, seasonality, government programs, and the sufficiency of the Company's liquidity and capital resources. These forward-looking statements are subject to certain risks, uncertainties, and other factors which could cause actual results to differ materially from those anticipated, including, without limitation, the risks described under the captions "Marketing, Customer Concentration, and Dependence on the Electronics Industry," "Growth Management," "Seasonality," "Global Business Considerations," "Competition and Other Factors," "Component Availability," and "Possible Termination of Government Programs." Order Backlog At June 30, 1996 order backlog believed firm was approximately $2.8 billion, compared with $2.1 billion a year earlier. As a portion of the backlog is subject to customer releases, there is some variability as to actual shipment date. Current indications are that approximately $2.7 billion dollars of this backlog will be shipped during fiscal 1997. Marketing, Customer Concentration, and Dependence on the Electronics Industry A majority of the Company's revenues are derived from direct sales to original equipment manufacturers. Marketing is conducted primarily by factory-based personnel in Canada, France, Ireland, Mexico, Singapore, Thailand, the United Kingdom, and the United States. The Company advertises on a limited scale and participates in various industry trade shows. Although the Company has several hundred customer accounts, a significant percentage of sales is derived from a limited group of customers in any particular period. Sales to individual customers that exceeded 10% of annual sales in any of the last three fiscal years were: Hewlett-Packard, $2,152 million in 1996, $1,049 million in 1995, and $436 million in 1994; and IBM, $326 million in 1994. In fiscal year 1996 the Company's ten largest customers contributed more than 70% of revenues. Significant reductions in sales to any of these customers could have a material adverse effect on the Company's results of operations. Customer contracts can be canceled and volume levels changed or delayed at any time. Timely replacement of canceled, delayed, or reduced contracts with new business cannot be assured. These risks are exacerbated as a majority of the Company's sales are to customers in the electronics industry, which is subject to rapid technological change and product obsolescence. Factors affecting the electronics industry in general, or any of the Company's major customers in particular, could have a materially adverse effect on the Company's results of operations. The majority of the Company's receivables are from high technology industry customers. Credit terms are extended to customers after performing credit evaluations. When significant credit risk exists, letters of credit or other security are generally requested. However, credit losses have occurred in the past, and no assurances can be given that credit losses, which could be material, will not reoccur. Growth Management The Company has experienced rapid growth in recent years. It has acquired facilities in several locations and may acquire or build additional facilities from time to time in the future. There can be no assurance that historical revenue growth will continue or that the Company will successfully manage other future plants it may acquire or build. As the Company manages existing operations and expands geographically, it may experience certain inefficiencies as it integrates new operations and manages geographically dispersed operations. The Company could be adversely affected if its new facilities do not achieve growth sufficient to offset increased expenditures associated with geographic expansion. Should [PAGE 2 OF EXCERPTS FROM FORM 10-K] the Company increase expenditures in anticipation of future sales levels which do not materialize, profitability could be adversely affected. On occasion customers may require rapid production increases which can stress the Company's resources. (See Note I to the Company's 1996 Consolidated Financial Statements, incorporated herein by reference.) Seasonality The Company has historically not considered its business to be consistently seasonal, although seasonal demands for its customers' products sold to consumers may impact quarterly revenues. In recent periods the proportion of the Company's products ultimately sold at retail has expanded, which has increased seasonality in the Company's sales. The Company believes this trend may continue. Global Business Considerations The Company operates internationally, with the majority of revenue generated in the United States, but with significant foreign activities. U.S. export and foreign sales from continuing operations were $1.611 billion in 1996, $1.187 billion in 1995, and $778 million in 1994, representing 35% of total sales in 1996, 44% in 1995, and 42% in 1994. Much of the Company's material is sourced from international suppliers. The Company is subject to the risks of currency fluctuations, possible fund transfer restrictions, and the burden of compliance with a variety of laws. To date these factors have not had a material adverse impact on the Company, but may in the future. (See Note H to the Company's 1996 Consolidated Financial Statements, incorporated herein by reference.) Patents and Licenses Patents are not significant to the Company's business. The Company believes that its success depends more upon the creativity of its personnel than upon patent ownership. Because of rapid technological change and rate of new patent issuance, certain of the Company's products may inadvertently infringe others' patents. If such occurs the Company believes that, based upon industry practice, necessary licenses could be obtained without material adverse impact, however, there can be no assurance given to that effect. Competition and Other Factors The Company competes against numerous domestic and foreign companies. It also faces competition from current and prospective customers, which evaluate the Company's capabilities against the merits of internal manufacturing. Competition varies depending on the type of service sought and the geographic area of competition. Competition is intense and will continue. A number of competitors are larger than the Company and have significantly greater resources, while a number of competitors are smaller with fewer resources. The Company could be adversely affected if its competitors introduce superior or lower priced services or products. During the last three fiscal years, electronics manufacturing services accounted for approximately 90% of total revenues. The Company devotes considerable resources to designing and developing new products, internal information systems and advanced manufacturing processes. Computer aided design centers are employed at strategic regional plants. New product development is usually undertaken in support of customer requirements. (See Note A to the Company's 1996 Consolidated Financial Statements, incorporated herein by reference.) The Company has developed internal systems to support manufacturing of customized finished products for delivery to distribution channels, or directly to end users. The Company believes these systems to be important to obtaining future, and maintaining existing, finished product assembly contracts. To remain competitive the Company must continue to develop and provide technologically advanced engineering and manufacturing services, maintain high quality levels, offer flexible delivery schedules, deliver finished products on a timely basis, and continue to be price competitive. The Company believes that maintaining and updating internal systems are important to obtaining future, and maintaining existing, contracts. Failure to satisfy any of the foregoing requirements could adversely affect the Company. Component Availability Components are sourced on a global basis. Component availability is periodically subject to constraints, shortages, and abundances. Although no assurances can be given, the Company has generally been able to obtain adequate supply to maintain production when shortages occur. However, shipment delays have occurred and may reoccur. Significant component constraints could adversely affect the Company. When shortages and excesses have occurred the Company has generally passed on price adjustments to its customers. Possible Termination of Government Programs The Company's contracts with the U.S. Government and its prime contractors are subject to audit and termination at the election of the Government. The Government in January 1991 terminated the U.S. NAVY A-12 Aircraft prime contracts. Litigation continues over seven canceled subcontracts from McDonnell Douglas Corporation. The Company seeks to recover the full amount of its claims, however no assurance can be given to that result. The carrying value of A-12 program residuals was less than 5% of [PAGE 3 OF EXCERPTS FROM FORM 10-K] June 30, 1996 inventories. The Company believes that its ongoing principal government programs will continue to be funded, but there can be no assurance given to that effect. No current government program accounts for more than 1% of consolidated revenue. Employees At June 30, 1996 the Company employed 15,524 persons, of which 8,863 were based in the United States. Except for two foreign plants, employees are not subject to collective bargaining agreements. There have been no work stoppages caused by employee activities. The Company believes that its employee relations are good. The Company's 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 the Company. The Company's business depends upon its 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 the Company's results of operations. Item 2. Properties. Domestically the Company owns, or finances with Industrial Revenue Bonds and treats as purchases for financial statement purposes, facilities in Alabama, California, Colorado, Maine, New Hampshire, New York, North Carolina, and South Dakota, with total area of 2,780,300 square feet. Internationally, the Company owns facilities in France, Ireland, Mexico, Singapore, Thailand, and the United Kingdom, with total area of 636,500 square feet and leases space in Canada and Hong Kong with total area of 50,000 square feet. Miscellaneous space amounting to 43,200 square feet is leased in various locations. Construction is in progress of a 110,000 square foot facility in Penang, Malaysia and a 50,000 square foot addition in Irvine, Scotland. The Company believes its facilities are modern, in good repair, and suitable for its operations. Item 3. Legal Proceedings. The Company is a party to several lawsuits incidental to its various activities and incurred in the ordinary course of business. The Company believes that it has meritorious claims and defenses in each case. 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 the Company. The Company is subject to a variety of environmental regulations relating to the use, storage, discharge and disposal of hazardous materials used in its manufacturing processes. Failure by the Company to comply with present and future regulations could subject it to future liabilities or the suspension of production. In addition, such regulations could restrict the Company's ability to expand its facilities or could require the Company to acquire costly equipment or to incur other significant expenses to comply with environmental regulations. The Company is not involved in any material environmental proceedings. Item 4. Submission of Matters to a Vote of Security Holders. --None PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters. The Company's Common Stock is traded under the "SCIS" symbol in the NASDAQ National Market System. At August 22, 1996 there were 2,119 shareholders of record. See Note G to the Company's 1996 Consolidated Financial Statements, incorporated herein by reference, for fiscal year 1996 and 1995 quarterly high and low bid stock prices. The Company has not paid cash dividends on its Common Stock to date. Payment of dividends is restricted as described in Note B to the Company's 1996 Consolidated Financial Statements, incorporated herein by reference. Item 6. Selected Financial Data. See page 1 of the Company's 1996 Annual Report to Shareholders, incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 1996 Results Compared With 1995 Sales in 1996 increased 70% to $4.545 billion from $2.674 billion in 1995 as demand for the Company's services increased, especially in finished product assembly. The Company purchased plants from Apple Computer in June 1996 and from Digital Equipment Corporation in April 1995. While these acquisitions added to fiscal 1996 revenue, the bulk of the sales gain came from the Company's other facilities. Operating income increased 75% to $159.475 million in fiscal 1996 from $91.044 million a year earlier. Operating margins improved during the year to 3.5% from 3.4% in fiscal year 1995. Operating margins improved in spite of larger finished product revenues, which typically carry lower operating margins, as absorption of fixed costs and manufacturing efficiencies improved. The Company operates principally in the Electronics Manufacturing Services (EMS) industry, servicing the same and similar customers of its domestic and foreign operations. The Company's management views geographic areas not only by individual operating results, [PAGE 4 OF EXCERPTS FROM FORM 10-K] but by strategic relationships in servicing customers worldwide. Thus, the presented geographic data in Note H to the Company's 1996 Consolidated Financial Statements, incorporated herein by reference, is not equitable as to the effect each geographic area has on consolidated operating results. Operating margins were lower in foreign areas than in domestic ones as intense competition and local economic conditions affected individual plants. Operating results in international areas increased from the prior year as the result of higher demand for Mexican services and improved cost performance by the Singaporean plant. Europe continued to be intensely competitive for the Company. Currency exchange rate fluctuations during fiscal year 1996 had minor impact on the consolidated operating results as the majority of the Company's foreign operations use the U.S. Dollar as their functional currency. Interest expense for the year, net of interest income, declined to 0.5% of sales from 0.7% in fiscal year 1995. This decline resulted from an improved asset turnover ratio, which increased to 4.0 from 2.8 a year earlier. Asset turnover improvement resulted from increased finished product assembly, that inherently yields higher turnover to offset its lower operating margins, and from improved working capital management. The higher interest expense amount resulted from higher levels of borrowings to support revenue growth. June 30, 1996 debt balance as a ratio of annualized sales (.09) is higher than earlier periods due to issuance of Convertible Notes in May 1996. The $287.5 million of that financing funded acquisition of Apple Computer's Fountain, Colorado facility and increased liquidity. Return on equity increased to 19.7% in 1996 from 13.8% in the previous year. The improvement resulted primarily from improved asset turnover. Fiscal year 1996's effective income tax rate differed from the U.S. statutory rate mainly due to state income taxes. The effective income tax rate increased to 40.5% for fiscal year 1996 from 40.2% for fiscal year 1995 due to higher income taxes on certain foreign earnings. See pages 2 to 14 of the Company's 1996 Annual Report to Shareholders, which is incorporated herein by reference, for further management discussion and analysis. Capital Resources and Liquidity June 30, 1996's working capital was $550 million compared with $280 million at June 30, 1995. June 30, 1996's current ratio was 2.2 as compared with 1.6 a year earlier. June 30, 1996's available liquidity was $640 million, $594 in unused credit facilities and $46 million in cash. Increased average borrowings are anticipated during fiscal 1997 to finance expanded working capital and capital expenditures to support planned revenue growth. The Company believes that its existing credit lines are sufficient to finance near term growth. Fiscal year 1997's capital expenditures are currently estimated at $90 million, $20 million more than estimated depreciation. Inflationary trends are not expected to have a material impact on operations as relatively high asset turnover and sizable fixed rate long-term financing minimize the effects of inflationary conditions. 1995 Results Compared with 1994 Fiscal year 1995 was a period of rapid expansion for the Company. Fiscal 1995's 44% sales increase resulted from strong end user market conditions, increased outsourcing trends, and the Company's available infrastructure of facilities, equipment, and internal systems. Domestically, sales increased 37%, while foreign sales increased 57%. The foreign sales increase was aided by the Grenoble, France, plant's first full year of operations, and higher demand for Asian and Mexican plants' services. Domestic sales growth was aided by the fourth quarter acquisition of Digital Equipment Corporation's Augusta, Maine, plant. Operating margins increased incrementally throughout fiscal 1995, even as finished product assembly business increased. Operating margin for fiscal 1995 was 3.4%, a modest improvement over 3.3% in the prior year. Domestic and foreign operating margins improved incrementally in fiscal 1995. Fiscal 1995 foreign results were adversely affected by a $2.2 million exchange loss, offset by $1.7 million domestic gain. Foreign operating profits were adversely impacted by significant customer and product transitions; a plant's acquisition, conversion, and physical move; intense competition from new market entrants; and lingering recession in Europe. Exchange rate fluctuations during the year moderately impacted consolidated profits. The devaluation of the Mexican Peso was not material, as the majority of transactions in Mexico are conducted in the U.S. Dollar. Fiscal 1995's interest expense declined to 0.7% of sales from 0.8% in fiscal 1994, even though average interest rates increased. This lower level of interest expense resulted from improved asset management that led to lower borrowing requirements. Other income increased $1.4 million in fiscal 1995 from that of the previous fiscal year as a result of increased investment income. The effective income tax rate increased to 40.2% in fiscal 1995 from 36.2% in fiscal 1994. The increase resulted from higher state and foreign income taxes. Average asset turnover in fiscal 1995 was 2.8 times compared to 2.2 times in fiscal 1994. The improvement was aided by a product mix shift towards finished products. [PAGE 5 OF EXCERPTS FROM FORM 10-K] Item 8. Financial Statements and Supplementary Data. Consolidated Balance Sheets (In thousands of dollars except share data) June 30, Assets 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------------------- Current Assets Cash and cash equivalents $ 46,493 $ 10,277 $ 35,822 Accounts receivable, less allowances of $6,000 in 1996, and $4,267 in 1995 and 1994 372,058 259,308 247,004 Inventories 554,090 456,107 400,595 Refundable and deferred federal and foreign income taxes 16,480 7,869 7,811 Other current assets 15,244 11,491 30,253 - ------------------------------------------------------------------------------------------------------------------------------ Total Current Assets 1,004,365 745,052 721,485 - ------------------------------------------------------------------------------------------------------------------------------ Property, Plant, and Equipment - Note B Land 19,830 16,731 15,115 Buildings, including construction in process 109,847 92,402 83,087 Equipment 419,122 347,845 301,012 Less accumulated depreciation and amortization (284,745) (242,953) (216,446) - ------------------------------------------------------------------------------------------------------------------------------ Net Property, Plant, and Equipment 264,054 214,025 182,768 - ------------------------------------------------------------------------------------------------------------------------------ Other Noncurrent Assets 14,776 22,215 15,959 - ------------------------------------------------------------------------------------------------------------------------------ Total Assets $1,283,195 $981,292 $920,212 ============================================================================================================================== Liabilities and Shareholders' Equity - ------------------------------------------------------------------------------------------------------------------------------ Current Liabilities Accounts payable and accrued expenses $ 400,682 $417,495 $294,281 Accrued payroll and related expenses 26,845 22,634 18,997 Federal, foreign, and state income tax 22,223 19,079 6,697 Current maturities of long-term debt 4,965 5,720 5,882 - ------------------------------------------------------------------------------------------------------------------------------ Total Current Liabilities 454,715 464,928 325,857 - ------------------------------------------------------------------------------------------------------------------------------ Deferred Income Taxes 5,313 509 1,091 Noncurrent Pension Liability 4,533 4,669 6,681 Deferred Compensation 7,600 5,040 3,548 Long-term Debt - Note B Industrial revenue bonds 21,310 21,306 23,306 Long-term notes 35,846 96,138 216,202 Convertible subordinated notes 281,617 38,926 38,893 - ----------------------------------------------------------------------------------------------------------------------------- Total Long-term Debt 338,773 156,370 278,401 - ------------------------------------------------------------------------------------------------------------------------------ Commitments - Note B Shareholders' Equity Preferred Stock, 500,000 shares authorized but unissued -0- -0- -0- Common Stock, $.10 par value: authorized 100,000,000 shares; issued 29,621,895 shares in 1996; 27,465,675 shares in 1995; and 27,335,782 shares in 1994 2,962 2,747 2,734 Capital in excess of par value 168,139 126,123 124,926 Retained earnings 308,150 227,195 181,952 Currency translation adjustment (6,649) (5,948) (4,637) Treasury stock - 29,683 shares at cost (341) (341) (341) - ---------------------------------------------------------------------------------------------------------------------------- Total Shareholders' Equity 472,261 349,776 304,634 - ---------------------------------------------------------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $1,283,195 $981,292 $920,212 ============================================================================================================================ See notes to Consolidated Financial Statements.
[PAGE 6 OF EXCERPTS FROM FORM 10-K] Consolidated Statements of Income (In thousands of dollars except per share data) Years ended June 30, 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------- Net sales $4,544,759 $2,673,783 $1,852,478 Costs and expenses 4,384,374 2,581,953 1,790,612 Goodwill amortization 910 786 1,158 - --------------------------------------------------------------------------------------------------------------------- Operating Income 159,475 91,044 60,708 - --------------------------------------------------------------------------------------------------------------------- Other income (expense): Interest expense (25,907) (18,400) (15,423) Other income, net 2,490 3,017 1,631 - --------------------------------------------------------------------------------------------------------------------- Income from Continuing Operations before Income Taxes 136,058 75,661 46,916 Income taxes - Note E 55,103 30,418 16,980 - --------------------------------------------------------------------------------------------------------------------- Income from Continuing Operations 80,955 45,243 29,936 - --------------------------------------------------------------------------------------------------------------------- Discontinued Operations - Note F: Loss from operations (net of income tax benefit of $1,480 in 1994) -0- -0- (4,283) Loss on disposal (net of income tax benefit of $4,358 in 1994) -0- -0- (4,492) - ---------------------------------------------------------------------------------------------------------------------- Loss from Discontinued Operations -0- -0- (8,775) - ---------------------------------------------------------------------------------------------------------------------- Net Income $ 80,955 $ 45,243 $ 21,161 ====================================================================================================================== Earnings (loss) per share - Note C: - ---------------------------------------------------------------------------------------------------------------------- Primary From continuing operations $2.69 $1.63 $1.08 From discontinued operations -0- -0- (.32) -------------------------------------------------------------------------------------------------------------- $2.69 1.63 .76 ============================================================================================================== Fully diluted From continuing operations $2.65 $1.56 $1.08 From discontinued operations -0- -0- (.32) -------------------------------------------------------------------------------------------------------------- $2.65 $1.56 $ .76 ========================================================================================================= See notes to Consolidated Financial Statements. Consolidated Statements of Shareholders' Equity (In thousands of dollars) Years ended June 30, ------------------------------------------- 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------- Common Stock Balance at July 1 $ 2,747 $ 2,734 $ 2,709 Conversion of debt - Note B 184 -0- -0- Stock options exercised 31 13 25 - ---------------------------------------------------------------------------------------------------------------------------- Balance at June 30 $ 2,962 $ 2,747 $ 2,734 ============================================================================================================================ Capital in excess of par value Balance at July 1 $126,123 $124,926 $122,785 Conversion of debt - Note B 38,640 -0- -0- Stock options exercised 3,376 1,197 2,141 - --------------------------------------------------------------------------------------------------------------------------- Balance at June 30 $168,139 $126,123 $124,926 =========================================================================================================================== Retained earnings Balance at July 1 $227,195 $181,952 $160,791 Net income for the year 80,955 45,243 21,161 - --------------------------------------------------------------------------------------------------------------------------- Balance at June 30 $308,150 $227,195 $181,952 =========================================================================================================================== Currency translation adjustment Balance at July 1 $(5,948) $ (4,637) $ (8,027) Translation (loss) gain (701) (1,311) 2,508 Deferred income taxes -0- -0- 882 - --------------------------------------------------------------------------------------------------------------------------- Balance at June 30 $(6,649) $ (5,948) $ (4,637) =========================================================================================================================== See notes to Consolidated Financial Statements.
[PAGE 7 OF EXCERPTS FROM FORM 10-K] Consolidated Statements of Cash Flows (In thousands of dollars) Years ended June 30, ---------------------------------------- 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------ Operating Activities Net income $ 80,955 $ 45,243 $ 21,161 Adjustments to reconcile net income to net cash (used for) provided by operating activities: Depreciation and amortization 60,972 49,839 48,623 Undistributed equity earnings -0- (2,180) (1,018) Noncurrent pension expense (136) (2,012) 860 Unrealized foreign currency exchange gain (683) (1,557) (406) Deferred income taxes (4,587) (1,228) (7,754) Other (139) (176) 529 Changes in current assets and liabilities: Accounts receivable (113,093) (10,982) (47,155) Inventories (99,032) (54,637) (79,694) Refundable income taxes 763 607 4,894 Other current assets (5,004) 19,124 11,054 Accounts payable and accrued expenses (11,788) 125,992 81,107 Income taxes 3,145 12,380 83 - ----------------------------------------------------------------------------------------------------------------------- Net Cash (Used for) Provided by Operating Activities (88,627) 180,413 32,284 - ----------------------------------------------------------------------------------------------------------------------- Investing Activities Purchase of property, plant, and equipment (109,912) (80,316) (46,488) Proceeds from sale of property, plant, and equipment 826 647 400 Change in noncurrent assets 9,956 (3,451) 47 - ----------------------------------------------------------------------------------------------------------------------- Net Cash (Used for) Investing Activities (99,130) (83,120) (46,041) - ----------------------------------------------------------------------------------------------------------------------- Financing Activities Net (decrease) increase in commercial paper and short-term financing (34,790) (84,273) 49,287 Payments on long-term debt (10,739,220) (6,901,801) (2,242,630) Proceeds from long-term debt 10,994,667 6,863,287 2,223,480 Issuance of common stock 3,407 1,210 2,166 - ----------------------------------------------------------------------------------------------------------------------- Net Cash Provided by (Used for) Financing Activities 224,064 (121,577) 32,303 - ----------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (91) (1,261) 1,430 - ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 36,216 (25,545) 19,976 Cash and cash equivalents at beginning of year 10,277 35,822 15,846 - ----------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at End of Year $ 46,493 $ 10,277 $ 35,822 =======================================================================================================================
Cash equivalents are primarily short-term interest bearing deposits. Interest paid was $22,564 in 1996, $18,131 in 1995, and $14,776 in 1994. Income taxes paid were $53,763 in 1996, $17,512 in 1995, and $14,781 in 1994. See notes to Consolidated Financial Statements. [PAGE 8 OF EXCERPTS FROM FORM 10-K] Notes to Consolidated Financial Statements Note A - Accounting Policies Consolidated Financial Statements include accounts of the Company and its subsidiaries after elimination of material intercompany accounts and transactions, and are based on management estimates. The functional currency of the majority of the Company's foreign operations is the U.S. Dollar. Inventories are stated at the lower of cost (principally first-in, first-out method) or market. Inventories primarily consist of costs incurred in support of customer contracts. Property, Plant, and Equipment are recorded at cost. The provision for depreciation is computed on the straight-line method over the estimated useful lives of individual assets. Goodwill, included in other noncurrent assets, is the unamortized excess of cost over underlying net tangible assets of companies acquired. Goodwill is amortized on a straight-line basis over ten years. Goodwill, net of amortization, amounted to $2,084,000, $2,995,000 and $3,682,000 at June 30, 1996, 1995, and 1994, respectively. Deferred income taxes are provided on temporary differences as certain revenues and expenses are reported in periods which differ from those in which they are taxed. U.S. income taxes have not been provided on certain undistributed earnings of foreign subsidiaries aggregating $44 million at June 30, 1996, which are considered to be permanently invested. Otherwise, $9 million of additional deferred taxes would have been provided. Costs and expenses principally represent engineering, manufacturing, and other costs incurred in support of customer contracts. Research and Development is conducted by the Company under both customer sponsored and company sponsored programs. Company sponsored programs include research and development related to government products and services, which are allocable and recoverable in the same manner as general and administrative expense under U.S. Government regulations. Customer sponsored research and development costs are accounted for as any other program cost. Total research and development costs incurred by the Company were $33,556,000 in 1996, $30,888,000 in 1995, and $30,074,000 in 1994. General and administrative expense included in costs and expenses approximated $18,965,000 in 1996, $16,508,000 in 1995, and $15,281,000 in 1994. Note B - Long-term Debt Industrial Revenue Bonds. The Company is obligated by lease or guarantee for $21,738,000 at June 30, 1996 ($21,815,000 at June 30, 1995, and $24,286,000 at June 30, 1994) of industrial revenue bonds maturing through the year 2015. The majority of such borrowings currently bear variable interest ranging between 3.5% to 7.75%. Such obligations are secured by related properties and irrevocable letters of credit. Long-term Notes. The Company is obligated under mortgages and notes maturing through the year 2004 amounting to $41,791,000 at June 30, 1996 ($47,658,000 at June 30, 1995, and $51,990,000 at June 30, 1994), and primarily bearing variable interest rates ranging between 5.0% and 7.7% at June 30, 1996. $21,445,000 of the outstanding balance is collateralized by the related properties. The Company has a credit facility with a group of domestic and international banks, consisting of a $260 million revolving credit line and a $150 million commercial paper agreement. The initial renewal date for this facility is December 8, 2000. Borrowings under the revolving credit line, at the Company's option, bear interest at a rate based upon either a defined Base Rate or the London Interbank Offered Rate (LIBOR) plus or minus applicable margins. The agreement allows the Company to enhance the marketability of its commercial paper with an irrevocable letter of credit in order to borrow at rates generally below revolving credit rates. Conversion privileges are provided in the event of nonsalability of commercial paper. At June 30, 1996 no amounts were outstanding under the facility, compared to totals of $54,690,000 at June 30, 1995, and $170,596,000 at June 30, 1994. Under the credit agreement, the Company must maintain certain financial ratios and meet certain balance sheet tests. Under the most restrictive provision of the credit agreement, $53,480,000 of June 30, 1996's retained earnings are available for the payment of cash dividends. A commitment fee of 0.25% is paid under the agreement on unused revolving credit. No compensating balances are required under the facility. Short-term borrowings may be drawn under the credit agreement. Because of the Company's ability and intent to refinance such borrowings, total borrowings under the agreement and other short-term borrowings expected to be refinanced, including commercial paper, are classified as long-term debt. The Company has an asset securitization agreement under which up to $200,000,000 of certain accounts receivable can be sold with limited recourse. As funds are collected, additional eligible receivables may be sold to bring the outstanding balance to the desired level. At June 30, 1996 outstanding receivables sold totaled $190,000,000 ($50,000,000 at June 30, 1995). As of June 28, 1996 the Company entered into Senior Note purchase agreements with a group of institutional lenders. On July 19, 1996 the Company closed the agreements and borrowed $100,000,000. The Notes bear interest at 7.59%, and are payable in six annual installments [PAGE 9 OF EXCERPTS FROM FORM 10-K] of $16,667,000 beginning in July 2001. The interest rate may be adjusted upwards by .75% if the Company fails to meet certain financial ratios. At June 30, 1996 unused credit facilities and commitments (including the senior notes issued in July 1996) approximated $594 million. Convertible Subordinated Notes. In May 1996 the Company issued $287,500,000 of 5% Convertible Subordinated Notes due May 1, 2006. The Notes are convertible into Common Stock at $48.75 per share and are redeemable beginning in May 1999. June 30, 1995's $39,474,000 of 5 5/8% Convertible Subordinated Debentures were called by the Company in August 1995, and substantially converted in September 1995 into 1,847,120 shares of Common Stock. Deferred charges netted against total long-term debt were $7,291,000 at June 30, 1996, $1,547,000 at June 30, 1995, and $2,063,000 at June 30, 1994. Debt, Lease, and Rental Payments. Long-term debt maturities for the next five fiscal years are: $5,823,000 in 1997; $3,204,000 in 1998; $2,932,000 in 1999; $4,746,000 in 2000; and $18,358,000 in 2001. Rental expense was $1,377,000 in 1996, $2,050,000 in 1995, and $1,146,000 in 1994. Minimum future rental payments for leased facilities and land are: $707,000 in 1997; $642,000 in 1998; $653,000 in 1999; $666,000 in 2000; $521,000 in 2001; and thereafter a land lease with an obligation of $461,000 in the year 2001 with an annual 7.6% escalation through 2019. Note C - Earnings Per Share Primary earnings per share are based on the weighted average number of common shares and dilutive common stock equivalents outstanding during each period. Common stock equivalents consist of stock options whose exercise price is less than the stipulated market price using the treasury stock method for both primary and fully diluted earnings per share. The fully diluted computations assume dilutive conversion of the Company's outstanding convertible notes, after adding back their after-tax interest expense. The number of shares used in computation were: primary earnings per share -- 30,140,472 in 1996, 27,820,798 in 1995, and 27,703,163 in 1994; and fully diluted earnings per share -- 31,265,883 in 1996 and 29,824,571 in 1995. Assumed conversion of outstanding convertible debentures was anti-dilutive in 1994's computation. Note D - Fair Value of Financial Instruments June 30, 1996's estimated fair values of the financial instruments represented by cash and cash equivalents, and interest and currency exchange rate swaps, approximated their recorded values. Convertible Notes had a June 30, 1996 trading price of 105 on the Private Offerings, Resale and Trading through Automated Linkages ("PORTAL") Market. Note E - Income taxes Continuing operations' income tax provision is summarized as follows: 1996 1995 1994 (In thousands of dollars) - ------------------------------------------------------------ Income from continuing operations before income taxes: Domestic $105,103 $72,811 $53,307 Foreign 30,955 2,850 (6,391) - ------------------------------------------------------------ Total $136,058 $75,661 $46,916 ============================================================ Taxes currently payable: Domestic $68,215 $32,750 $17,940 Foreign 2,857 2,045 3,097 Deferred taxes: Domestic (16,772) (2,636) (2,521) Foreign 803 (1,741) (2,418) Deferred taxes allocated to translation adjustment -0- -0- 882 - ------------------------------------------------------------ Total $55,103 $30,418 $16,980 ============================================================ The reconciliation of the provision for income taxes and that based on the U.S. statutory rate is: (In thousands of dollars) 1996 1995 1994 -------------------------------------------------------------------- Income taxes at U.S. statutory rate $47,620 $26,481 $16,421 Effects of U.S. state income taxes net of federal benefits 2,925 3,575 1,054 Effects of loss carryforwards 1,685 351 (147) Effects of foreign operations 802 (657) (3,068) Permanent differences 2,071 668 2,720 - -------------------------------------------------------------------- Income taxes $55,103 $30,418 $16,980 ==================================================================== At June 30, 1996 the net deferred tax asset was: Deferred (In thousands of dollars) Asset Temporary Difference Amount (Liability) - ------------------------------------------------------------------------------ Expenses not currently deductible: Bad debt provision $ 5,845 $ 2,046 Accrued expenses 29,470 10,315 Inventory adjustments 38,486 13,341 Depreciation (3,220) (966) Income not currently taxable: Undistributed foreign earnings (33,500) (10,765) Long-term contracts (9,021) (3,157) Other (756) (274) Net operating loss carryforwards 6,781 304 Valuation allowance: Beginning of year (5,742) (814) Net change for year (523) 588 - ------------------------------------------------------------------------------ Total $ 27,820 $ 10,618 ============================================================================== Note F - Discontinued Plant and Operations During March 1994 the Company adopted a closure plan for a domestic plant associated with its government business. Operating income for fiscal 1994 reflects operating losses and disposal charges associated with that plant and write-down of certain assets to estimated [PAGE 10 OF EXCERPTS FROM FORM 10-K] net realizable values, aggregating $9,200,000. The plant was closed in August 1994. The Company also adopted in March 1994 plans for sale of certain of its proprietary product business units. The units are accounted for as discontinued operations and are so segregated in fiscal 1994's income statement. Post measurement date operating losses and disposal costs for these operations approximated amounts provided for. The discontinued business units' fiscal year 1994 sales were $49,370,000; their loss from operations, net of a $1,480,000 income tax benefit, was $4,283,000; and their loss on disposal, net of a $4,358,000 income tax benefit, was $4,492,000. Substantially all discontinued business units have been sold at approximate values assigned to them at disposal determination date. Note G - Selected Quarterly Financial Data (Unaudited) Quarterly financial results and stock prices for the last two fiscal years were: 1996 1995 ------------------------------------------------------------------------------------------------- (In thousands of dollars except Fourth Third Second First Fourth Third Second First per share data) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter ------------------------------------------------------------------------------------------------- Net sales $1,351,886 $1,112,744 $1,203,506 $876,623 $842,352 $591,465 $621,545 $618,421 Gross profit 48,278 39,493 42,594 30,020 29,690 20,545 21,238 20,357 Net income 24,565 19,110 22,158 15,122 14,046 10,943 10,197 10,057 Fully diluted earnings per share $.77 $.63 $.74 $.51 $.48 $.39 $.37 $.36 Market stock price range: High $ 49 $43 3/8 $37 3/4 $38 $26 $19 1/2 $22 $22 1/4 Low 35 1/8 25 23 7/8 28 5/8 17 1/2 17 16 14 3/4
Quarterly and annual earnings per share are independently computed using the estimated effective income tax rate and Common Stock market prices applicable for that period. Consequently, the sum of quarterly fully diluted earnings per share for fiscal 1995 does not equal the total for the year, as the increased effective income tax rate for the year impacted the annualized dilutive effect of Convertible Debentures. Additionally, the substantially higher June 30, 1995, closing market price for the Company's Common Stock, as compared to the previous three quarter's closing price, impacted the annualized dilutive effect of outstanding stock options. In the first three quarters of fiscal 1996 and fiscal year 1995, the combined dilutive effect of Convertible Debentures and stock options was less than three percent. Note H - Geographic Data The Company operates principally in the Electronics Manufacturing Services (EMS) Industry, servicing the same and similar customers of its domestic and foreign operations. The following table summarizes the Company's geographic data. It is based on a required presentation format that does not consider equitably the interrelationship between geographic regions as to customer manufacturing, engineering, marketing, and management activities. The Company's management views geographic areas not only by their individual operating results, but by their strategic relationships in servicing customers on a worldwide basis. (In thousands of dollars) Identifiable Assets Sales Operating Income 1996 1995 1994 1996 1995 1994 1996 1995 1994 Domestic $ 820,044 $558,227 $516,453 $3,063,460 $1,581,671 $1,155,211 $125,303 $85,609 $60,368 Foreign 397,410 388,516 361,363 1,481,299 1,092,112 697,267 34,172 5,435 340 Corporate 65,741 34,549 42,396 N/A N/A N/A N/A N/A N/A ----------------------------- ----------------------------------- ---------------------------- Consolidated $1,283,195 $981,292 $920,212 $4,544,759 $2,673,783 $1,852,478 159,475 91,044 60,708 ============================== ================================== Corporate net other expense (23,417) (15,383) (13,792) --------------------------- Consolidated income from continuing operations before income taxes $136,058 $75,661 $46,916 =============================
Intergeographic transfers are not significant. Corporate assets include domestic cash and cash equivalents, refundable and deferred income taxes, "rabbi trust" assets, and notes receivable. Major customer data, including credit risk concentration, is incorporated by reference from Part I, Marketing and Customers, of the Company's Form 10-K for the year ended June 30, 1996. U.S. export sales approximated $130,000,000, $95,000,000, and $81,000,000 for the years ended June 30, 1996, 1995, and 1994, respectively. [PAGE 11 OF EXCERPTS FROM FORM 10-K] Note I - Plant Acquisition On May 31, 1996 the Company finalized an agreement with Apple Computer, Inc. (Apple) to purchase Apple's 360,000 square foot Fountain, Colorado manufacturing plant, related equipment, and certain inventory for approximately $195,000,000. In conjunction with this asset purchase, the Company entered into a related multiyear manufacturing agreement with Apple for agreed upon levels of designated Apple products. Note J - Employee Benefit and Stock Option Plans Employee Benefit Plans. The Company provides retirement benefits to its domestic employees who meet certain age and service requirements through three plans: a defined benefit pension plan, a qualified employee savings plan, and a deferred compensation plan. Pension plan benefits are computed based upon compensation earned during the member's career at the Company, or its subsidiaries, and years of credited service. The Company funds its retirement benefits annually at an amount that approximates the maximum deductible for income taxes. Company contributions to savings and deferred compensation plans are equal to a percentage of employees' contributions and are fully funded when the liability is incurred. The Company's and employees' contributions to the deferred compensation plan are held in an irrevocable "rabbi trust". Nonemployee Directors also participate in an irrevocable "rabbi trust" deferred compensation plan. The Company also has defined contribution pension plans for its European employees who meet certain requirements. The following table sets forth the defined benefit pension plan's status and the amounts reflected in the Company's Consolidated Financial Statements at June 30. Defined benefit pension plan's status is as follows: (In thousands of dollars) 1996 1995 1994 Actuarial present value of benefit obligations: Accumulated benefit obligation (including vested benefits of $13,502 in 1996, $12,383 in 1995, and $9,459 in 1994 ) $ (14,677) $(13,785) $(10,842) ======================================= Projected benefit obligation for service rendered to date $ (20,692) $(20,548) $(16,254) Plan assets at fair market value 15,333 11,454 9,030 -------------------------------------- Projected benefit obligation in excess of plan assets (5,359) (9,094) (7,224) Unrecognized net obligations existing at transition 395 435 475 Unrecognized prior service cost 296 329 427 Unrecognized net (gain)/loss (2,879) 631 (1,442) -------------------------------------- Accrued pension liability $ (7,547) $(7,699) $(7,764) ====================================== Net pension cost included the following components: Service cost - benefits earned during the period $ 2,162 $ 1,964 $ 1,779 Interest cost on projected benefit obligation 1,464 1,328 1,125 Actual return on plan assets (2,382) (1,837) (206) Net amortization and deferral 1,365 1,009 (553) -------------------------------------- Net periodic pension cost $ 2,609 $ 2,464 $ 2,145 ====================================== Rates used in computing periodic pension costs: Actual weighted-average discount rate used for computing projected benefit obligation's present value 8.0% 8.0% 8.0% Expected long-term rate of return on plan assets 9.0% 9.0% 9.0% Future compensation increase 5.5% 5.5% 5.5% Charges to operations for Company sponsored retirement benefits $ 5,983 $ 5,161 $ 4,478
At June 30, 1996, domestic pension plan assets were invested 72% in equity based mutual funds, 18% in corporate bond mutual funds, and 10% in cash and money market funds. Option Plans. The Company has a stock option plan that grants options to key employees at not less than 100% of market value on date of grant. Options vest 20% upon granting and 20% per annum for the next four years. Options expire ten years from the grant date. The Company accounts for its stock options in accordance with APB Opinion 25 and related Interpretations. Accordingly, no nonmonetary fair value compensation costs associated with options have been recorded. The amount of fair value compensation computed under FASB Statement 123 for options granted during 1996 is not material to the Company's consolidated net income. Such costs may in the future become material as the initial phase-in period of FASB Statement 123 expires. Information relating to the changes in the Company's stock options follows: [PAGE 12 OF EXCERPTS FROM FORM 10-K] (Shares in thousands) 1996 1995 1994 ------------------------------ --------------------------- --------------------------- Weighted-Average Weighted-Average Weighted-Average Shares Exercise Price Shares Exercise Price Shares Exercise Price Outstanding at beginning of year 1,225.1 $12.19 1,145.0 $10.56 1,188.4 $ 8.49 Granted 294.0 $34.79 251.7 $18.92 270.0 $18.10 Exercised (309.1) $11.02 (129.8) $ 9.31 (250.5) $ 8.65 Canceled (27.0) $21.18 (41.8) $16.61 (62.9) $10.77 ------------------------------ ---------------------------- --------------------------- Outstanding at end of year 1,183.0 $17.81 1,225.1 $12.19 1,145.0 $10.56 ============================== ============================ =========================== Exercisable at June 30 699.4 $12.37 801.9 $ 9.69 700.0 $ 8.75 ============================== ============================ ===========================
Stock option shares available for additional granting at June 30 were 823.1 in 1996, 1,090.1 in 1995, and 305.6 in 1994. The following table summarizes June 30, 1996's outstanding stock option information (shares in thousands): Weighted-Average Range of Number Remaining Weighted-Average Number Weighted-Average Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercisable Price $6.00 - $11.88 405.8 4.25 years $ 6.98 404.8 $ 6.97 $12.65 - $17.75 128.4 6.55 $13.36 87.6 $13.11 $18.25 - $21.13 374.4 7.88 $18.65 155.0 $18.58 $29.38 - $31.38 15.0 9.47 $30.04 3.0 $30.17 $35.00 - $37.00 259.4 9.34 $35.03 49.0 $35.00 - ---------------- ----------- ----------------- ---------------- ------------- ----------------- $ 6.00 - $37.00 1,183.0 6.83 years $17.81 699.4 $12.37 ================ =========== ================= ================ ============= =================
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS To the Shareholders and Board of Directors SCI Systems, Inc. We have audited the accompanying consolidated balance sheets of SCI Systems, Inc. as of June 30, 1996, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of SCI Systems, Inc. at June 30, 1996, 1995 and 1994, and the consolidated results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Birmingham, Alabama August 2, 1996 [END OF EXCERPTS FROM FORM 10-K] [INSIDE BACK COVER OF ANNUAL REPORT TO SHAREHOLDERS] [LEFT COLUMN] Corporate Directory Board of Directors Olin B. King (1) Chairman of the Board of the Company Huntsville, Alabama Howard H. Callaway (2)(4) CEO, Crested Butte Mountain Resort, Inc. Crested Butte, Colorado Chairman Callaway Gardens Resort, Inc. Pine Mountain, Georgia William E. Fruhan (2)(3) Professor of Business Administration Harvard University Cambridge, Massachusetts Joseph C. Moquin (1)(4) Retired CEO Teledyne Brown Engineering Madison, Alabama A. Eugene Sapp, Jr. (1)(3) President of the Company Huntsville, Alabama Wayne Shortridge (2)(3) Partner Paul, Hastings, Janofsky & Walker Atlanta, Georgia G. Robert Tod (2)(4) President, CML Group, Inc. Acton, Massachusetts Jackie M. Ward (3)(4) Chief Executive Officer Computer Generation Incorporated Atlanta, Georgia Director Emeritus Thomas H. Lenagh Financial Advisor Greenwich, Connecticut Committees of the Board (1) Executive Committee (2) Audit Committee (3) Investment Committee (4) Compensation Committee [MIDDLE COLUMN] Officers Chairman of the Board and Chief Executive Officer Olin B. King President and Chief Operating Officer A. Eugene Sapp, Jr. Senior Vice Presidents Richard A. Holloway David F. Jenkins Jeffrey L. Nesbitt Peter M. Scheffler Jerry F. Thomas Alexander A.C. Wilson Vice Presidents Charles Barnhart Patrick R. Barry James P. Bilodeau C.T. Chua Warren F. Cline, Jr. Joseph J. Cosgrove Robert P. Eisenberg James H. Ferry Francis X. Henry George J. King David L. Lengel LeRoy H. Mackedanz Michael P. McCaughey James H. McElroy Raymond E. Minter Michael H. Missios B. William Nelson Charles N. Parks P. William Quinn Francois M. Thionet Joseph A. Tilmant Christopher J. White John R. Wilkins, Jr. F. M. Wong Secretary Michael M. Sullivan Treasurer Ronald G. Sibold, Jr. [RIGHT COLUMN] General Counsel Powell, Goldstein, Frazer & Murphy Atlanta, Georgia Auditors Ernst & Young LLP Birmingham, Alabama Transfer Agent and Registrar Chase Mellon Shareholder Services 1-800-756-3353 Security Trading Markets Common Stock NASDAQ National Market System Symbol SCIS Common Stock Options Chicago Board Options Exchange Symbol SSQ 1-800-OPTIONS Agent Banks Revolving Credit Citibank, N.A. Commercial Paper ABN AMRO Bank, N.V. Asset Securitization Bank of America, N.T. & S.A. Annual Shareholders' Meeting Fourth Friday in October Shareholder Inquiries By Mail: Shareholder Relations 2000 Ringwood Avenue San Jose, California 95131 By Telephone: 1-888-SCI-FAXX (Toll Free) By Fax: 1-408-943-6123 Annual Report to the S.E.C. The annual report to the Securities and Exchange Commission on Form 10-K provides complete exhibits and schedules. Copies will be furnished upon written request to Shareholder Relations at the address above. SCI SYSTEMS, INC. Printed by free enterprise in the USA [END OF ANNUAL REPORT TO SHAREHOLDERS] [END OF EXHIBIT 13] EX-21 5 SUBSIDIARIES OF REGISTRANT EXHIBIT 21--SUBSIDIARIES OF REGISTRANT Listed below are the principal subsidiaries of the Company and the percentage of voting securities owned by the Company. The Company's other subsidiaries, taken in the aggregate, would not constitute a significant subsidiary. Jurisdiction in which Percentage Incorporated or Organized of Voting Securities Owned SCI Systems (Alabama), Inc. Alabama 100% SCI Technology, Inc. Alabama 100% SCI Systems Colorado, Inc. Colorado 100% SCI Foreign Sales, Inc. U.S. Virgin Islands 100% SCIMEX, Inc. Alabama 100% SCI Systems de Mexico S.A. Mexico 100% SCI Holdings, Inc. Delaware 100% SCI Manufacturing Singapore Pte. Ltd. Singapore 100% SCI Systems (Thailand) Limited Thailand 100% SCI Irish Holdings Republic of Ireland 100% SCI Ireland Limited Republic of Ireland 100% SCI Alpha Limited Republic of Ireland 100% SCI Systems (Canada), Inc. Canada 100% Newport, Inc. Georgia 100% SCI Holding France, S.A. France 100% SCI France, S.A. France 100% SCI Manufacturing (Malaysia) SDN BHD Malaysia 100% EX-23 6 CONSENT OF INDEPENDENT AUDITOR Exhibit 23- Consent of Independent Auditor We consent to the incorporation by reference in this Annual Report (Form 10-K) of SCI Systems, Inc. of our report dated August 2, 1996, included in the 1996 Annual Report to Shareholders of SCI Systems, Inc. Our audits also included the financial statement schedule of SCI Systems, Inc. listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in (i) the Registration Statement (Form S-8 No. 2-86230) and related Prospectus pertaining to the Savings Plan of the SCI Systems, Inc. Employee Financial Security Program; (ii) the Registration Statement (Form S-8 No. 2-91587) and related Prospectus pertaining to the Incentive Stock Option Plan of SCI Systems, Inc.; and (iii) the Registration Statement (Form S-8 No. 33-11894) and related Prospectus pertaining to the Non-Qualified Stock Option Plan of SCI Systems, Inc. of our report dated August 2, 1996, with respect to the consolidated financial statements and schedule of SCI Systems, Inc. incorporated by reference in this Annual Report for the year ended June 30, 1996. /S/ Ernst & Young LLP Birmingham, Alabama September 26, 1996 EX-27 7 EXHIBIT 27 (FDS)
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30, 1996'S BALANCE SHEET AND THE INCOME STATEMENT FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS. 1,000 YEAR JUN-30-1996 JUL-1-1995 JUN-30-1996 46,493 0 378,058 6,000 554,090 1,004,365 548,799 284,745 1,283,195 454,715 338,773 0 0 2,962 469,299 1,283,195 4,544,759 4,544,759 4,384,374 4,385,284 (2,490) 0 25,907 136,058 55,103 80,955 0 0 0 80,955 2.69 2.65
-----END PRIVACY-ENHANCED MESSAGE-----